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Expert Opinion: A Stand-Alone T-Mobile Isn’t an Option for the Future. So What’s Best for Consumers and Workers?

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“T-Mobile’s parent Deutsche Telekom is not in a position to finance the necessary large scale investments in the U.S. for T-Mobile to remain competitive.” - T-Mobile CEO Phillip Humm, sworn U.S. Senate testimony, May 11, 2011

WASHINGTON, May 26, 2011 - Let’s start with the facts. A stand-alone T-Mobile is not an option for the future. German parent company Deutsche Telekom had announced that it was seeking a deal and had considered a speculative offer, Sprint and AT&T for the sale. T-Mobile did not have the cash or spectrum to invest in a next-generation, 4G LTE wireless network. And without a 4G network, there could be no future for T-Mobile, its customers and employees.

AT&T and T-Mobile use the same technology. Combining T-Mobile and AT&T spectrum turns two two-lane roads into a four lane superhighway. AT&T is willing to put up $8 billion in extra investment. And AT&T, a financially healthy company, will pay for the transaction in equity and internal cash flows.

In contrast, a merged Sprint/T-Mobile is simply unable to use T-Mobile’s assets to best advantage of U.S. consumers. Sprint still has not integrated its 2005 Nextel purchase, and it uses a different wireless technology than T-Mobile. Sprint’s “BB minus” non-investment grade bond rating would have increased the cost of capital that Sprint would have had to borrow for the T-Mobile purchase and network investment.

So the question that regulators must consider as they weigh the AT&T/T-Mobile transaction is not “how can we preserve the current wireless market structure?” but “will the consumer benefits from this transaction outweigh any potential reduction in competition?”

In other words, will the combined spectrum and financial efficiencies of AT&T/T-Mobile enable it to build out its wireless infrastructure to more places, more quickly than would have happened without the merger? And will sufficient competition and regulatory oversight promote innovation and protect consumers?

The answer is yes. The wireless market is highly competitive today – witness the daily deluge of full-page newspaper ads, TV spots, the dizzying array of wireless devices and payment plans, and the hundreds of thousands of applications available for download on wireless devices. This will not go away after an AT&T/T-Mobile merger.

What we will see is a financially healthy company, AT&T, that will use T-Mobile’s spectrum and assets to address one of our nation’s greatest challenges: how to get high-speed broadband to every corner of our country so that we catch up with our global competitors.

Four years ago, the Communications Workers of America launched our Speed Matters campaign to spotlight the fact that high speed broadband is critical if technological innovation is to reach all Americans and improve the quality of their lives. Many of the access and speed challenges we identified then are still challenges today. This merger is a step forward in addressing them.

AT&T, through the AT&T/T-Mobile merger, has made a commitment to expand access to high-speed wireless Internet to 97 percent of the population. This is critical as America continues to struggle to compete in the global marketplace.

By combining AT&T and T-Mobile’s spectrum and wireless assets, a post-merger AT&T will be able to offer 4G LTE service to 55 million more people than it would have been able to reach without the transaction. It also will also be able to improve the quality of cell service on current generation data networks.

And the wireless broadband expansion that will be a direct result of this merger is especially important for residents of rural areas whose futures in large part depend on the creation of sustainable communities connected to the rest of the world by broadband.

This merger will also be good for workers. Past experience with major wireless mergers indicates that employee retention issues can be managed through careful planning and the return of outsourced work to the United States. This merger also will allow 20,000 T-Mobile employees the opportunity to choose – free from fear and intimidation – whether they want a collective voice in the workplace. This is because AT&T, the only union wireless company, maintains strict neutrality, enabling workers to freely choose whether they want union representation.

This is night and day from how Sprint operates. In a well-known case, Sprint closed a call center that employed a largely female, immigrant workforce rather than allow a union election. Sprint outsources network management and engineering jobs, and outsources and offshores as much as 70 percent of its customer service work. Clearly bad news for T-Mobile workers.

The Communications Workers of America believes AT&T’s acquisition of T-Mobile is a win-win proposition. Merger approval is our only opportunity to expand next-generation wireless broadband build-out to more places more quickly, improve quality on AT&T’s existing network, and facilitate good jobs in the industry and the larger economy. The merger should be approved and the public benefits codified and monitored.

George Kohl is Communications Workers of America senior director for legislation and policy.

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