In April, Sprint CEO Michel Combes essentially threatened regulators that unless the merger between his company and T-Mobile is approved, job cuts would follow. These would include layoffs at Sprint’s headquarters in suburban Kansas City.
No, not employment reductions that would be the inevitable result of the combination, but cuts because the company might be forced to remain free-standing. Methinks Combes is more concerned with the hefty golden parachute he would receive from the merger rather than Sprint employees or customers.
This is the event horizon for corporate deal making, the logic from which no job creation will escape. The gravitational pull of greed and power is too much.
Of course, that’s not how Combes framed it.
“Without the merger, the trajectory for Sprint will worsen and Sprint’s prospects will be limited,” he wrote to FCC Commissioner Geoffrey Starks. “Sprint will be forced to further reduce its operating expenses, which means more job reductions in Kansas City and throughout the company, and our future as a standalone company will be in jeopardy.”
Not mentioned is what might have happened if Combes and his predecessors had been focused on building market share, serving customers and investing in innovation, rather than being obsessed with acquisitions and mergers.
At least T-Mobile, headquartered in Bellevue, could walk and chew gum at the same time. In addition to trying to sell itself to AT&T or acquire Sprint, the company worked hard to grow its business, becoming the third largest wireless carrier after AT&T and Verizon, with 80 million customers. Sprint, by contrast, has about 50 million.
On Monday, the FCC’s laissez-faire Chairman Ajit Pai recommended that the commission approve the $26.5 billion merger. But later the same day, the Justice Department appeared to balk, concerned that the deal would stifle competition. Minor concessions the carriers made, such as selling Sprint’s Boost Mobile prepaid cell service, were reportedly not enough for the DOJ’s antitrust arbiters.
With Trump and Republicans overseeing both entities, it’s an interesting disagreement. Did T-Mobile’s patronage of the D.C. hotel owned by President Donald Trump go for naught?
Otherwise, none of the economic negatives have changed since I wrote about this saga a year ago.
Most mergers still fail to deliver their promised benefits. Boosting shares in the combined company will depend on job cuts and rationalization of other assets. Higher prices and fewer choices for customers are likely. Anti-competitive mergers reduce not only competition but also innovation.
Bigger is not better for the U.S. economy, where highly concentrated industries are linked to lower job growth and anemic rate of startups. Bigger damages our system of self-governance, with giant companies and industries allowed enormous political influence, with great risk of corruption.
Now, the pair is promising to build a 5G network. Oh, wait, they said that before, and each company claims to be doing it individually already. But America’s giant wireless carriers aren’t world leaders.
As of 2017, the United States suffered some of the slowest 4G network speeds in the world, slower even than Russia. Singapore, South Korea, Hungary, the Netherlands and Norway were the fastest. Companies there are less worshipful of the god of increasing shareholder value.
The merger also raises questions of equity and privacy protection, according to the activist group Free Press.
For example, Sprint and T-Mobile serve larger shares of low-income Americans than AT&T or Verizon.
“But if we instead concentrate the market, it decreases the incentives for any of these wireless companies to innovate and risk entering the home-internet market with a 5G product,” Free Press writes. “The post-merger T-Mobile would instead chase the higher-margin, post-paid affluent wireless market that AT&T and Verizon focus on….”
Even so, I suspect the deal will eventually happen. Antitrust is not a Republican priority. Let the Digital Gilded Age roll on.
Notice: the_widget was called incorrectly. Widgets need to be registered using
register_widget(), before they can be displayed. Please see Debugging in WordPress for more information. (This message was added in version 4.9.0.) in /var/www/html/wp-includes/functions.php on line 4196