May 11, 2011 / 4:10 AM / 7 years ago

AT&T, T-Mobile CEOs defend mobile mega-merger

WASHINGTON (Reuters) - Top executives of AT&T Inc and T-Mobile insisted on Wednesday their proposed merger would benefit consumers and rejected criticisms that it would stifle innovation.

A view shows the AT&T store sign in Broomfield, Colorado April 20, 2011. REUTERS/Rick Wilking

AT&T Chief Executive Randall Stephenson and T-Mobile USA CEO Philipp Humm appeared before the Senate Judiciary’s antitrust subcommittee to defend their deal, which would concentrate 80 percent of U.S. wireless contract customers in just two companies — AT&T/T-Mobile and Verizon Wireless.

AT&T touted fewer dropped calls and faster data speeds to entice consumer and policymaker support for its $39 billion bid to take over Deutsche Telekom AG’s T-Mobile USA.

Lawmakers said they were intrigued by the potential to expand faster 4G wireless services to more parts of the country and provide a short-term solution to the spectrum crunch impairing voice and data services in high-density areas.

But they want more evidence the deal won’t also hurt consumer prices and options.

“The merits of this argument need to be examined. The certainty of the outcome needs to be explored,” Senator Patrick Leahy, chairman of the full Judiciary Committee, said about potential consumer benefits.

Congress has no direct role in reviewing the merger but has oversight of the Federal Communications Commission and the Justice Department. Those two agencies are expected to take a year to complete their reviews.

T-Mobile’s Humm stressed that the company on its own would not be able to remain competitive in the U.S. wireless market as Deutsche Telekom is unable to finance the investments required to handle the explosion in data usage.

Humm also said T-Mobile lacked the spectrum holdings to expand coverage to suburban and rural areas or to launch next generation 4G wireless Internet service — a problem the combination with AT&T would solve.

“The transaction will provide our combined customers and the American public improved services faster than either company could provide on its own,” Humm said.

AT&T’s Stephenson said the merger will allow AT&T to improve its services, handle more data traffic and bring mobile Internet to 55 million more Americans than it could have done on its own.

Lawmakers probed the companies about the potential harm to competition and the threat of job losses, and questioned whether AT&T could better spend $39 billion by upgrading its network.

“An industry that once was a monopoly owned by AT&T in the last century is in danger of reverting to a duopoly in this new century,” said subcommittee Chairman Herb Kohl. “So the burden will squarely be on AT&T and T-Mobile to convince us why this merger is necessary.”

Critics of the merger, including Sprint Nextel, Cellular South and public interest groups, also testified before the subcommittee.

No. 3 mobile operator Sprint already faces tough competition from industry leaders Verizon Wireless and AT&T.

“AT&T already has the spectrum, reach and resources it needs to serve rural America. Adding T-Mobile extends AT&T’s reach to only 1 percent more of the U.S. population,” Sprint CEO Daniel Hesse said.

“The fundamental problems of duopoly cannot be fixed with divestitures and conditions,” he added, urging policymakers to deny the merger.

Editing by Steve Orlofsky

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