AT&T and T-Mobile defend merger on Capitol Hill

@CNNMoneyTech May 11, 2011: 1:04 PM ET
AT&T CEO Randall Stephenson (left) chatted with T-Mobile USA CEO Philipp Humm as they waited for the start of a hearing before the Senate's Antitrust, Competition Policy and Consumer Rights Subcommittee

AT&T CEO Randall Stephenson (left) chatted with T-Mobile USA CEO Philipp Humm as they waited for the start of a hearing before the Senate's Antitrust, Competition Policy and Consumer Rights Subcommittee.

NEW YORK (CNNMoney) -- The federal government famously smashed up AT&T in a landmark antitrust action that completely revamped the telecom market. Almost 30 years later, is AT&T once again poised to grow so big it eclipses all rivals?

Congress is set to press AT&T and T-Mobile's top executives on that issue Wednesday during a Senate subcommittee hearing about the companies' proposed $39 billion merger. Critics of the deal, including the CEOs of Sprint Nextel and Cellular South, also turned out to voice their opposition.

Antitrust concerns arose immediately after AT&T (T, Fortune 500) announced in March that it would acquire T-Mobile USA from Deutsche Telekom. A few weeks later, analysts at an AT&T presentation asked pointed questions about how the company would keep the wireless industry competitive.

AT&T CEO Randall Stephenson tackled the issue in his opening statement to the subcommittee.

The U.S. wireless industry "remains one of the most competitive in the world," Stephenson said. He reiterated AT&T's past statements counting regional players like MetroPCS (PCS) and Cricket as rivals.

Customers in 18 of the top 20 U.S. markets would have at least four carriers to choose from even after the deal is completed, Stephenson said, echoing a point AT&T has made repeatedly.

The other panelists and the subcommittee members quickly attacked it.

"It's like saying Wal-Mart competes with a mom-and-pop store," sputtered Gigi Sohn, president of consumer activist group Public Knowledge.

"Have you ever seen a local pricing plan?" Sohn said. "Have you ever seen AT&T advertise against MetroPCS or Cricket?"

Sen. Al Franken, a Democrat from Minnesota, read a list of past quotes and paraphrased statements from Stephenson that indicated the AT&T CEO thinks of his company as a national brand.

"You don't think Apple gave you on an exclusive on [the iPhone] because you're a national company?" Franken asked. "You think they would have given it to a local [merchant]?"

"Well, it's not as likely," Stephenson conceded. "But, you know, they did spread it around in Europe."

Franken sighed audibly.

Other subcommittee members pointed to AT&T advertising that boasts about the company's national reach. And Daniel Hesse, CEO of Sprint Nextel (S, Fortune 500), bitterly disagreed that regional players will be able to compete.

"This merger is unfixable," Hesse said bluntly in his opening statement. "It will stifle the vibrancy of the wireless industry. It will turn back the clock to the time of Ma Bell."

Hesse said the merger would snuff out regional competitors and keep prices high for consumers. Ultimately, he said, the deal is positive for only the three major wireless parties: Shareholders of AT&T, Verizon (VZ, Fortune 500) and Deutsche Telekom -- the sole shareholder of T-Mobile.

Investment in 4G: AT&T's CEO also talked up the company's pledge to better serve its customers by continuing to expand its 4G network.

As part of its merger agreement, AT&T committed to expand its 4G/LTE network by 1.2 million square miles, making it accessible to an additional 46.5 million Americans, mostly in rural and smaller communities.

"T-Mobile does not have enough spectrum to compete on LTE," said Philipp Humm, the CEO of T-Mobile USA. "[The deal] will allow LTE to reach 97% of the U.S. population, which is something T-Mobile could not do on its own."

Sohn, the Public Knowledge president, sniffed at AT&T's promises of expansion.

"AT&T is a serial acquirer," she said. "They don't bother to invest -- they buy."  To top of page

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