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US senators take AT&T to task over T-Mobile deal

ATT-t-mobile-AT&T-tmobile-logo-merger-saleA day after a Senate subcommittee grilled Google and Apple over concerns about user location data collection, another group of US senators brought in representatives of AT&T, T-Mobile and Sprint Nextel to answer questions about AT&T’s plan to purchase T-Mobile USA from Deutsche Telekom for $39 billion.

At the opening of the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights hearing, chairman Sen. Herb Kohl (D-WI) argued that AT&T’s acquisition of T-Mobile, the fourth largest wireless provider in the US, would give too much power to AT&T, which is already the second largest wireless company in the nation.

“Four competitors are better than three,” said Sen, Kohl, who added that AT&T would be better off spending its cash on improving its own network, rather than simply buy another one. Kohl, who’s opening statement was indicative of the senators’ skepticism about the deal, warned that “the burden will squarely fall on ATT and T-Mobile” to convince regulators that the merger is beneficial to American customers.

On the other side of the bench sat AT&T CEO Randall Stephenson, T-Mobile CEO Philipp Humm and Dan Hesse, chief executive of Sprint Nextel.

“This transaction is all about consumers,” said Stephenson. “It’s about keeping up with consumer demand and having the capacity to drive innovation and competitive prices for consumers.” Pushing the AT&T line further, Stephenson said that his company will have eight times the data load it currently carries by 2015 due to an increase of bandwidth-hungry smartphones like Apple’s iPhone, and warned that an impending “spectrum crunch” could cause its prices to rise for customers.

Stephenson sparked further dubiety among the subcommittee’s senators when he claimed that AT&T did not consider T-Mobile to be an important competitor.

“Is it really credible to come up here and sit here and tell us that you and T-Mobile are not close competitors?” asked Sen. Kohl, who added that T-Mobile regularly offers similar services at a lower cost than AT&T and Verizon Wireless.

T-Mobile’s Humm argued that the deal was essential to his company because it does not have enough wireless spectrum in its arsenal to compete. Humm also said that the company had been steadily losing subscribers, and that its current parent company, Deutsche Telekom, was unwilling to make the necessary investments in T-Mobile USA to keep the company afloat.

Sprint CEO Dan Hesse came out strong against the deal, saying that the deal would create a destructive duopoly, and said that his company could likely not survive if the merger were approved. He added that it was “conceivable” that the AT&T/T-Mobile merger, which would put 80 percent of the wireless industry in the hands of only two companies, would force Sprint to sell itself to either AT&T or Verizon.

“If the Justice Department and Federal Communications Commission decide to permit the takeover, the wireless industry would regress to a 1980s-style duopoly,” Hesse said. He added: “Just say no to this takeover.”

In order for the deal to go through, it must be approved by both the Justice Department and the Federal Communications Commission. Regulators have indicated for months that the deal faces a “steep climb” to approval.