There were plenty of warnings about the possible negative effects of the proposed merger of T-Mobile and Sprint on rates, rural coverage and jobs during the House Telecom subcommittee hearing, “Protecting Consumers and Competition: An Examination of the T-Mobile/Sprint Merger.” But T-Mobile CEO John Legere, not surprisingly, held his own.
Chris Shelton, president, Communications Workers of America (CWA), said the merger would “kill American jobs, lower wages, and raise prices.”
CWA estimated that the merger will eliminate an estimated 30,000 jobs, 25,500 of which would be in retail stores. The Roosevelt Institute and the Economic Policy Institute predicted a decline in annual earnings between $520 and $3,276 for workers, according to Phillip Berenbroick, senior policy council, Public Knowledge.
Shelton noted that T-Mobile’s 2018 acquisition of iWireless, a regional carrier in Iowa, led to the closure of more than 72 percent of iWireless corporate stores, more than 93 percent of authorized dealer stores and the call centers in Des Moines and Cedar Rapids, Iowa.
Shelton predicted harm would come to employees of the carriers not even involved in the merger. “When you decrease competition for labor, wages go down. That is what will happen throughout the wireless industry at all the wireless carriers if the merger takes place,” he said.
The merger will harm rural carriers by removing a nationwide roaming option, according to Carri Bonnet, general counsel, Rural Wireless Association. She also called Legere’s pledge to freeze prices for three years “cold comfort.”
Legere repeated with relish his mantra that competition will increase, and the number of jobs will rise, saying he would add 600 new retail stores and five new customer experience centers.
“The capacity and scale and the power of the network that this merger will give us will really let me take it to the [AT&T and Verizon] and bring competition in a way that it has not been seen before,” Legere said. “I’m salivating to take it to the cable carriers, as well. This is about creating scale and capacity to super-charge the uncarrier to bring the duopolists kicking and screaming to what they should be doing in 5G.”
The New T-Mobile will need 3,600 additional employees in its first year and more than 11,000 more employees by 2024 than the standalone companies, Legere said.
“This merger will be a tremendous jobs creator at New T-Mobile and across the country,” Legere said. “Our merger will be jobs positive from day one – and going forward. The build-out of our 5G network, investment in new customer care centers, and expansion into new businesses like video distribution, broadband, and enterprise services means thousands more jobs than the two standalone companies would have needed.”
Legere denied claims that synergies from the merger would come from job losses, saying that “a significant amount of the synergy” would come through the decommissioning of 35,000 cell sites. “Together, we will have 110,000 macro nodes. We will pick 75,000 of them, build 10,000 more and the decommissioning of 35,000 cell sites,” he said.
Marcelo Claure, executive chairman, Sprint, said, considering that his company lost $25 billion during the last decade and currently has $40 billion in total debt, the merger is necessary for Sprint to continue to be competitive.
The post-merger T-Mobile will continue to be innovative, because its share of the market will continue to be small compared with AT&T and Verizon.
California Representative Anna Eshoo, who has signed a letter in support of the merger, asserted that the four-carrier market is not currently competitive, because AT&T and Verizon control roughly two thirds of the market and have had the same market share for the last 15 or so years. Creating a strong third carrier could change that, she said.
“This is hardly a dynamic, competitive market. For all intents and purposes, we have a duopoly. Americans pay some of the highest prices for wireless services in the developed world, have the least choice, especially in the rural areas,” she said.
Both companies are missing ingredients to become serious competitors in the market, according to Eshoo.
“T-Mobile has a strong record as competitor. I think we can all agree to that, but it lacks critical mid-band spectrum to compete,” she said. “That is where Sprint comes in. Spectrum is gold and Sprint has it. But Sprint has a $40 billion debt and cannot make the investment needed to compete with AT&T and Verizon.”
Doug Brake, director of broadband and spectrum policy, Information Technology and Innovation Foundation, spoke in favor of the merger, taking issue with those that want to preserve the four-carrier marketplace.
“The four-to-three lens ignores the rapidly differentiating business models in and adjacent to wireless services,” Brake said. “Raw connectivity is increasing commodified and wireless companies are looking to new revenue streams.”