AT&T Inc.’s proposed buyout of T-Mobile USA through a cash-and-stock transaction valued at $39 billion could impact hundreds of local workers should it be approved by federal regulators. According to both companies, however, it is too soon to speculate on the local ripple effects. Experts say national redundancies would be expected through such a large buyout.
Dialed in On March 20, AT&T and Deutsche Telekom AG, the parent-company of T-Mobile USA, reached a definitive agreement to allow AT&T, the nation’s largest wireless carrier in terms of subscribers, to acquire T-Mobile, the fourth-largest wireless carrier. The deal must be approved by the Federal Communications Commission and the Justice Department, a process that is expected to take 12 months.
As part of the deal, AT&T has committed to expanding its 4G LTE (Long Term Evolution) network to 95 percent of the country, reaching 46.5 million more Americans than it currently serves and potentially covering 294 million people. In the event that the transaction does not close, AT&T would have to pay T-Mobile $3 billion under the agreement.
National analysts are split on whether the merger would be approved, but they agree that service is likely to improve with the expanded broadband infrastructure and that rates would most likely increase. A Wall Street Journal report said thousands of jobs could be lost due to redundancies.
“It is the (Obama) administration’s position to attempt to expand access, and I don’t think it’s an accident that the pitch that’s being used by the companies to justify this combination is, guess what, access,” said William Donoher, a Missouri State University associate professor of management with experience in commercial law and in corporate governance. “This is a political move and selling point, in my opinion.”
The T-Mobile Customer Service Center at 2645 N. Airport Plaza Ave. employed about 760 workers as of early December and pledged to hire 300 additional workers in 2011, according to Springfield Business Journal archives.
AT&T’s $19 million Joplin call center was built in 2007 and was expected to employ 600, according to the Joplin Tri-State Business Journal archives. As of March 22, the company was hiring customer service specialists, according to AT&T’s online career center.
AT&T spokeswoman Katherine McClelland declined to disclose the number of current employees at the Joplin center.
Both Dee Ann Thompson, human resources manager, and Mark Conrad, general manager of the T-Mobile call center in Springfield, said they were unable to comment on the proposed buyout. Anna Friedges, a T-Mobile spokeswoman, said the company would continue to work as a competitor to AT&T until the buyout is approved.
“Until this deal is closed, we remain an independent competitor to AT&T. There is no change in service for our customers,” Friedges said in an e-mail.
McClelland, who represents AT&T Corporate Communications through St. Louis public relations firm Fleishman-Hillard, confirmed that both companies would continue to operate independently until a merger is denied or finalized.
McClelland said she did not know how many jobs could potentially be lost in the area. AT&T currently employs more than 266,000 workers, while T-Mobile employs fewer than 38,000.
“On a national level, I can tell you that we expect most required reductions to be achieved through attrition,” McClelland said, adding it was too soon to speculate whether Springfield and Joplin jobs would be consolidated.
Calls to the FCC for comment on the process were not returned by press time.
The nation’s third largest carrier, Overland Park, Kan.-based Sprint Nextel Corp., has come out against the deal.
While urging regulators to scrutinize the buyout, Sprint said in a March 28 statement the deal “would reverse nearly three decades of actions by the U.S. government and the courts that modernized and opened U.S. communications markets to competition. The wireless industry has sparked unprecedented levels of competition, innovation, job creation and investment for the American economy, all of which would be undone by this transaction.”
Sprint indicated the merged company would be nearly three times the size of Sprint in terms of wireless revenue. AT&T and Verizon, the nation’s second-largest carrier, would then essentially control the wireless market as a “duopoly,” Sprint said.
The two largest wireless providers would control nearly 80 percent of the market should the deal be approved by federal regulators. Verizon Communications Inc. has roughly 94 million subscribers.
Bell background Today’s AT&T and Verizon are companies born from the consolidation of seven “baby bells” that resulted from the 1984 breakup of the Bell system. The Justice Department sued AT&T in 1982 to increase competition in the industry under the Sherman Antitrust Act of 1974. At that time, the company had roughly $150 billion in assets and 1 million employees.
“The very vehicles designed by the feds 25 years ago to create competition or, at least, limit market power on a national basis, ironically, those vehicles are now forming a virtual monopoly, or duopoly, position in these markets,” Donoher said.
AT&T was purchased by “baby bell” SBC Inc., formerly known as Southwestern Bell, for $16 billion in 2005. Today’s Verizon itself sprang from a series of mergers that included “baby” Bell Atlantic Corp. and GTE Corp. in 2000.
“(Wireless) is a substantially undifferentiated service. So, how do you win in that type of marketplace? Price. How do you do that when everybody else is trying to do the same thing? You gain scale so that you can drive your costs down and then compete on price,” Donoher said. “That’s been the entire focus of the industry since the breakup occurred.”
When it comes to cutbacks, he said it only makes sense that some number of employees from the combined companies would be redundant, which would make staff cuts a benefit of the merger.
“In theory, what should happen then is that the company could price at a lower level. Unfortunately, we are reaching the end point of this cycle and there’s not enough competitors to play this game anymore,” Donoher said, adding that it may be possible for AT&T to simply pocket the savings and not pass them onto the consumer because the customer doesn’t have as many options. “That’s where we are potentially heading. I don’t know if we are there yet.”[[In-content Ad]]
