T-Mobile, AT&T executives spar with rivals on merger

WASHINGTON — Tough questioning by skeptical senators showed the chief executives of AT&T and T-Mobile USA just how difficult it's going to be to get regulatory approval for their proposed $39 billion merger.

"The more providers of cellphone service, the lower the price, the better the quality of service and the more innovation that results," said Sen. Herb Kohl, D-Wis., chairman of the Senate's antitrust subcommittee.

"So the burden will squarely be on AT&T and T-Mobile to convince us why this merger is desirable, how it will benefit consumers, and to put aside our concerns that it may very well harm competition," he said Wednesday during the first congressional hearing on the huge wireless deal.

AT&T Chief Executive Randall Stephenson and T-Mobile CEO Philipp Humm struggled to do that.

Stephenson said the purchase would lead to fewer dropped and blocked calls and faster mobile Internet connections for subscribers. The deal also would position AT&T to cover more than 97 percent of the U.S. population with its new high-speed, fourth-generation wireless service, he said.

"This transaction is all about consumers," Stephenson told the subcommittee. "It's about keeping up with consumer demand. It's about having the capacity to drive innovation and competitive prices for consumers."

But Sprint Nextel Chief Executive Daniel Hesse warned that if federal regulators approve the deal, the wireless industry would regress to "a 1980s-style duopoly" dominated by AT&T and Verizon — with smaller carriers like Sprint struggling to compete.

That point was echoed by Victor "Hu" Meena, president and CEO of Mississippi-based Cellular South, who said the transaction would "allow the wireless industry to continue down a path toward a duopoly made up of Ma Bell's two behemoth descendants."

AT&T, the nation's second-largest wireless carrier, is seeking federal approval to acquire T-Mobile USA, the Bellevue-based fourth-largest carrier, from Germany's Deutsche Telekom AG.

The cash-and-stock deal would catapult AT&T past Verizon Wireless to become the biggest cellphone company in the country, and leave Sprint as a distant No. 3.

Although it will ultimately be up to the Justice Department and the Federal Communications Commission to approve or block the transaction, Congress will likely influence the outcome of the government review.

Stephenson told lawmakers Wednesday that by allowing AT&T and T-Mobile to combine their limited wireless spectrum holdings, the transaction would enable both companies to make more efficient use of their existing airwaves at a time when both are running out of capacity needed to handle mobile apps, online video and other bandwidth-hungry wireless services.

But Sprint's Hesse rejected AT&T's claims that it is running out of spectrum as "a myth." He said the company holds more licensed spectrum than any other wireless carrier in the U.S., but is simply not using those airwaves efficiently and is instead "warehousing" them for future services.

Smaller regional carriers are concerned that they won't be able to strike reasonable roaming agreements that allow them to send wireless traffic over the networks of the big national companies in places where they don't have their own systems.

Smaller carriers also fear that they will be unable to reach affordable "special access" agreements to use the vital back-haul lines that connect wireless towers to broader telecommunications networks and the Internet. Much of that critical network infrastructure is owned by AT&T and Verizon, which also dominate the landline market.

"I think there's still probably a lot of folks at (the Justice Department) and the FCC who aren't persuaded yet they should approve the deal," said Rebecca Arbogast, an analyst at brokerage Stifel Nicolaus & Co. "I still think there's a material risk the deal might get blocked, but I think it's more likely that it gets passed."