March 23, 2011 – By Sinead Carew
ORLANDO, Florida (Reuters) - Sprint Nextel Corp cried foul over a planned merger between AT&T Inc and T-Mobile USA, saying the deal would stifle competition and potentially hurt its profitability.
Sprint executives attending a wireless industry event on Monday criticized AT&T's proposed $39 billion of Deutsche Telekom's U.S. unit, announced on Sunday, and listed several ways it could hurt the wireless industry.
"When one competitor has that much buying power they can determine the fate of different products," Fared Adib, a Sprint executive in charge of handsets, said on the sidelines of the CTIA conference in Orlando, Florida.
Earlier in the day Sprint Chief Executive Dan Hesse had spoken out against the deal during a keynote panel of CEOs, and said it would be bad for competition in the industry.
"I am concerned about it," said Hesse, while sitting beside another panelist, AT&T's mobile chief Ralph de la Vega. Hesse also admitted that his Sunday was ruined by the AT&T/T-Mobile USA announcement.
Sprint, the No. 3 U.S. mobile service, already faces tough competition from its two bigger rivals, AT&T and Verizon Wireless, a venture of Verizon Communications and Vodafone Group Plc. The combination of AT&T and T-Mobile USA, the No. 4 U.S. operator, would leapfrog Verizon Wireless as market leader.
If the AT&T deal is approved, the top two operators would serve about three-quarters of U.S. mobile contract customers between them, according to analysts' estimates.
Aside from concerns about consumer choice, the top operators could potentially get much better pricing from suppliers than smaller rivals like Sprint, Steve Elfman, Sprint's president for network operations, told Reuters.
Elfman said the size of a combined AT&T and T-Mobile would be a threat in more ways than one.
A bigger AT&T could also become more aggressive in marking down its prices, again putting Sprint at a disadvantage.
"If we have to go down in pricing it will affect our profitability. It could also drive pricing up," Elfman said.
AT&T said the company will be happy to address Sprint's concerns with lawmakers and U.S. regulators which will be reviewing the deal.
De la Vega said critics of the deal were "not looking at it in the right way" as customers in most U.S. markets have "more choices than in almost any other country in the world."
Consumer groups have been worried that AT&T would use its bigger market muscle to increase prices for cost conscious consumers. But de la Vega dismissed this argument.
"Wireless prices have never gone up. They've always come down," he said, but stopped short of promising lower bills.
And as operators like AT&T upgrade to new and more efficient technologies, the price consumers pay per megabit of data downloaded "will come down" in the future, he said, noting that this may mean consumers will use more data services.
The executive promised that customers of T-Mobile USA, which is often seen as a good-value provider, would be able to keep their existing price plans after the AT&T deal.
AT&T's de la Vega said the T-Mobile USA deal would allow a bigger number of customers to have access to Apple Inc's iPhone but would not say when AT&T would offer iPhone service on the T-Mobile USA network.
The company plans to convert the T-Mobile USA business to the AT&T brand after the deal.
Verizon has already joined AT&T in carrying iPhone, putting further pressure on Sprint. Hesse declined to say if subsidies required for iPhone would be too high for Sprint to offer the popular device.
The top telecom companies are also in a race to offer customers fast wireless Internet connections, and the heavy capital spending required puts the bigger players at an advantage. Sprint had 58,000 net subscriber additions in its most recent quarter, while Verizon Wireless had 872,000 additions in the fourth quarter and AT&T had 400,000.
Even without the merger, Hesse told the panel that subsidies operators have to pay for smartphones are already rising as devices become more advanced.
He introduced a new high-speed phone and a tablet computer, both from HTC Corp at the show.
(Additional reporting by Barbara Liston; Editing by Derek Caney and Richard Chang)