by Mark Ciavola
Today, the U.S. Department of Justice filed an anti-trust suit to block AT&T’s impending merger with T-Mobile. There are many opinions from many people clogging up Facebook and Twitter feeds, but so many of these people don’t fully understand the issue or the facts involved in this case.
Having worked for AT&T Wireless in 2001, and having survived two mergers – one when Cingular (SBC) bought AT&T Wireless, and a second when SBC bought AT&T – I understand this issue all too well. So I thought I’d shed some light on the issue from the perspective of the companies, the employees, and the consumer.
The most important thing to be aware of here is T-Mobile’s current condition. The 4th largest wireless company in the U.S., T-Mobile has been forced over the years to keep their prices low in order to compete with larger companies like Verizon and AT&T. Furthermore, they have had to accept customers that Verizon and AT&T turn away because of credit requirements, leaving them with far more customers who don’t pay their bills. Fiscally, T-Mobile is not set up for long-term success, and their sale will happen – whether to AT&T or not.
The one advantage AT&T has in this deal is that they operate a GSM network, just like T-Mobile. Verizon uses CDMA and Sprint uses CDMA and the old Nextel’s iDEN.
All that jibberish means that the AT&T and T-Mobile networks are the most compatible, and would avoid the lengthy and costly conversion that was required when Sprint merged with Nextel – even having to offer a special phone that would access both networks for two years after the deal.
Now, from the consumer’s point of view, this deal would allow some 120 million Americans to realize a larger coverage area, more retail outlets, and an improved buying power which will result in an increased selection of devices and a wider array of available services – including T-Mobile customers finally having access to the iPhone.
Don’t believe me? Simply look back to when AT&T and Cingular merged. Never before had so many wireless consumers enjoyed such a large network, expanded choice in devices, and an unbelievable amount of phones priced at $50 and below – often free with contract extension.
And, because both AT&T and Cingular used GSM technology, customers enjoyed improved coverage overnight.
Not to mention that AT&T’s service has suffered tremendously because of the high-bandwidth content being accessed by iPhone users – and expanding their network overnight will ease this congestion. As an AT&T customer, I eagerly await this.
The biggest complaint from the Justice Department is that this merger will stifle competition across the U.S. However, I direct you to companies like TracFone, MetroPCS, U.S. Cellular, and Cricket (the 5th – 8th largest wireless companies in the U.S.) as perfect examples of low-cost – and often no-contract – alternatives to the large companies.
In addition to these choices, there are often concessions made by companies in merger deals such as this. When Cingular acquired AT&T, the new company had to divest its control of several smaller markets to regional carriers – something I am sure would occur here as well. Although I feel compelled to mention that those customers living in the divested areas end up with worse coverage and less choices, because the government chooses to intervene in this manner.
Next up: Employees.
When AT&T Wireless was purchased by Cingular (SBC), several things changed. For one, the new company saw increased purchasing power when it came to negotiating benefit costs for employees. In addition, while there were some initial layoffs because of duplicate positions and redundancies (myself included), the company continued to grow (and I returned as well).
Employees also were able to be part of the largest wireless company in America, which resulted in increased sales – which means increased commissions for sales folks and more job security for everyone else.
Who would argue that T-Mobile employees are better off because they work for the 4th largest company with the worst coverage of the four major carriers? In addition, because T-Mobile is forced to accept low-credit customers to keep up with the larger companies, many of their sales result in cancellations, and therefore commission chargebacks.
Also, T-Mobile does not offer the iPhone – the most sought after wireless device in America.
This merger would change all of that, and keep the standard of living constant for AT&T employees, but be a tremendous boon for T-Mobile workers.
The one downfall I see for T-Mobile employees is that they would have to deal with the Communication Workers of America (CWA), which is a foul organization posing as a pro-worker union. Although most people against this merger seem to love unions, so I guess this would also be a positive for them.
The labor agreement CWA and AT&T negotiated while I was there was good for Cingular employees, but terrible for AT&T workers – who had a far better deal before the union showed up.
One thing I’d like everyone reading this to remember, is that America is far behind Europe and Asia when it comes to wireless coverage and services. The reason for this is that we demand free phones and low-priced plans, leaving carriers with far less money to re-invest in their networks – which is very expensive. In Europe, there is no such thing as included minutes, free nights & weekends, unlimited text messaging, etc. Because of this difference in culture, created by the carriers themselves when they offered free phones in exchange for contracts, we will never be on par with the rest of the wireless world.
One way American companies can close that technology gap is by continuing to increase their subscriber base, and by creating and selling new services which generate additional revenue.
This merger will help achieve that. It will help offer AT&T’s 97 million consumers and T-Mobile’s 33 million consumers the best in what wireless can offer.
AT&T/Cingular has the most grueling and stringent testing phase for all products and services, and has world-class training programs for its employees to better service its customers.
At no time has T-Mobile ever been a top-tier carrier – and I say that as both a consumer, and as someone who lived the mobile phone culture for seven years.
This merger would be a plus for all involved – except Verizon and Sprint who would realize lower market share.
Verizon and Sprint should realize that they will receive 3-4 million new subscribers from customers who leave the newly combined AT&T/T-Mobile for a variety of reasons – including owing AT&T a previous debt, or disliking AT&T. But I guess they aren’t thinking that far ahead.
In the end, however, the Justice Department is overstepping its bounds by interfering with the free market. They do not understand the wireless industry, they are simply attempting to “protect consumers” by not allowing the 120 million AT&T and T-Mobile customers to enjoy a better experience – while assisting Sprint and Verizon in preventing AT&T from once again becoming the largest wireless carrier in America (until Verizon once again retakes the lead – which it did after the AT&T/Cingular merger, and will again).
The government does not increase competition, private industry does. See TracFone, MetroPCS, U.S. Cellular, and Cricket as examples.
The Justice Department needs to focus on the real challenges in our country – instead of suing states for enforcing the law, banning online poker, and refusing to investigate voter intimidation cases.
Until then, it’s hard to take them seriously.