AT&T Response to Hesse Remarks

Posted by: Jim Cicconi on April 15, 2011 at 5:44 pm

We have great respect for Dan Hesse as an executive, but his comments today about AT&T’s merger with T-Mobile are way off base.  They’re also totally at odds with his own past statements.

As recently as last October, Mr. Hesse said the wireless industry is ‘hyper competitive‘.  The month prior, his CFO talked about how ‘tough‘ retail competition is in the wireless market, citing at least six major competitors.  In February of last year, Mr. Hesse said, “M&A is absolutely a way to get the growth in the industry, if a particular transaction makes sense for anybody.”  He went on to say, “I think consolidation will be healthy for the industry, some consolidation. It is, needless to say, very competitive.”  And in January of last year at a Citi Global Conference, Mr. Hesse said, “Well, there is no question that we have an extremely competitive wireless industry in this country and that the pricing is getting much more aggressive.” 

Given that Sprint is a major competitor to AT&T in the hyper competitive wireless market Mr. Hesse describes, no one should be surprised that they would oppose this merger.  But it is self-serving for them to argue that the highly competitive wireless market they cited only months ago is now threatened by the very type of transaction they seemed prepared to defend previously. 

The fact is that Sprint is the 58th largest corporation in America, with 50 million customers, $40 billion in annual revenue, and the self-proclaimed #1 spectrum position in the industry.  Under current management, Sprint is once again growing customers.  We respect them as (to use their own words) a tough retail competitor in a hyper competitive wireless market with five or more players in most major markets.  And we believe the facts will demonstrate that this hyper competitive market will not become less so simply because of one transaction. 

If Sprint is worried about the growth or position of its competitors in the wireless space, the proper place for them to respond is in the marketplace.  Where customers have ample choices, as they clearly do in wireless, any competitor can improve its prospects by offering a better idea, a better product, better service, or a better price.  In short, as in any competitive market, Sprint’s prospects for growth are in their own hands, and rest with their own business decisions. 

AT&T’s merger with T-Mobile is very much in the public interest and will bring the extraordinary benefits of mobile broadband to millions of people.  Rural communities that don’t have a viable broadband option today will finally have the same type of high speed service big cities enjoy.  And our customers in urban areas can expect improved service that will keep up with the tremendous capacity demands being placed on our network.  These are the very type of steps needed to meet the goals set forth by the President and the National Broadband Plan, and are vital if we are to maintain our country’s ability to compete globally.

Comments (6)

No A merger at this point is not in the best interest of the wireless buy public atlarge. The merger could leave the US market with just two dominant providers—and the prospect of higher rates and fewer choices for consumers,This does explain all the data caps on both wire and wireless services. They have to pay for this merger some how and it seems on the backs of it’s customers. Instead of lowering their prices to compete, AT&T will utilize their massive gov’t tax breaks and other advantages to buy the competition so they can keep prices high. “capitalism” FTL A fourth player “helped keep the other three at least semi-honest(10 players would be better). If you think they’re arrogant now, just wait till they’ve cut this ole boyz club down to three.” AT&T will now have a monopoly on GSM. If you doubt that AT&T is trying to game the system,the company spent $15 million lobbying in 2010 alone. The biggest beneficiary? House Speaker John Boehner. It employs 93 lobbyists. Seven more and it would have its own private Senate. bottom line haveing more companies offering mobile is better for us all not less.

Shadow Runner April 16, 2011 at 9:44 am

Sprint may have an excellent position in spectrum, but it is not an incumbent local exchange carrier and thus is forced to subsidize its competitors via exorbitantly priced “special access” lines. Even with all that spectrum, its largest competitors can make it unprofitable, forcing it to lose money on every customer. Jim, this is not a position of strength.

Brett Glass April 16, 2011 at 10:52 am

Hardly a duopoly in the making when this merger goes through. It would be a trifecta for the consumer’s benefit as the bigger 3 would all be individually desirable in their own way to the cust..
Fact is, the ONLY Sector impact would REALLY BE Blackberry and smart-type phones, nothing else at all. 50% of mobile users don’t use “High End” type phones like myself. My daughters and wife use BB and Droid and I-Phones all 3 are different, THAT is a true example of how undigitive it is that everyone has the choice they want and that’s simply capitalism at it’s best. Thanks for reading.

Lou Ditmer April 16, 2011 at 11:41 pm

With the explosion in wireless data traffic and the on-going transition to 4G, all carriers have been confronted with the challenge of designing their networks to accommodate this increase in traffic. Sprint offers 4G service today using Clearwire as its network provider and Clearwire has indicated it relies almost exclusively on wireless backhaul, thus bypassing the incumbent local exchange carrier. Together with the backhaul service offerings of CLECs, cable companies and fixed wireless providers, Sprint cannot be viewed as being limited to backhaul provided by incumbent LECs. With 50 million wireless customers, Sprint is well-positioned to make use of these alternative providers and/or make capital allocation decisions that address its competitive position in the “hyper-competitive” wireless market.

AT&T Blog Team April 19, 2011 at 9:57 am

As usual, we are told that the wireless market is “hyper-competitive,” and then AT&T assures us that “one transaction” will not change that. What about an AT&T/Verizon merger? (Whoops — didn’t mean to give you guys any ideas.) Wouldn’t that deal change the competitiveness of the whole market? In other words, doesn’t the identity of the parties and the nature of the specific transaction matter?

Matt Wood April 19, 2011 at 5:26 pm

Every wireless backhaul terminates in a wired backhaul. After only a hop or two. Wireless backhaul will not save either Sprint or Clearwire (which is really on the ropes nowadays) from the steady bleeding of excessive leased line costs.

Brett Glass April 19, 2011 at 10:13 pm

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