AT&T, Sprint spar over T-Mobile deal at congressional hearing

AT&T (NYSE:T) CEO Randall Stephenson defended his company's proposed $39 billion acquisition of T-Mobile USA at the first congressional hearing on the deal, while Sprint Nextel (NYSE:S) CEO Dan Hesse warned that the deal would harm the wireless industry and make his company a more likely takeover target.

The executives gave testimony, along with T-Mobile USA CEO Philipp Humm and others, before the Senate Judiciary Committee's subcommittee on antitrust, competition policy and consumer rights. Also testifying were Cellular South CEO Hu Meena, Gigi Sohn, the president of public interest group Public Knowledge, and Larry Cohen, the president of the Communications Workers of America. The highly anticipated hearing produced a few fireworks, but the executives and others giving testimony largely hewed to their talking points.

Indeed, the written testimony that Stephenson, Humm and Hesse gave near the start of the hearing was largely a reiteration of points the companies have been making since the deal was announced March 20. It was under questioning from the senators on the committee that the fault lines began to emerge. One of the key justifications of the acquisition is that it would allow AT&T to deliver LTE service to 97 percent of Americans, covering an additional 55 million more Americans than AT&T's current LTE plans. In March, AT&T said the deal would bring LTE to 95 percent of Americans, or 46 million additional people.

"T-Mobile does not have sufficient spectrum to roll out a competitive LTE network while also continuing to support its existing GSM and HSPA+ networks," Humm said in his testimony. "By combining the spectrum of both companies, the entity will be able to support LTE and the two legacy technologies, GSM and HSPA+. It will allow LTE to reach more than 97 percent of the U.S. population, as stated by AT&T, which is something T-Mobile would not have been able to do on its own."

Stephenson said that the LTE benefits fit with President Obama's goal of extended high-speed mobile broadband to 98 percent of all Americans within five years. "This is a private market solution to address a public policy objective," Stephenson said, adding that AT&T will not need to use Universal Service Fund money to reach its LTE buildout targets.

Hesse was given a chance to respond and shot back: "At what cost? Is it worth eliminating a very robust, competitive, extremely important industry to the U.S. economy to achieve that goal? I think 'no.'"

The executives also jousted over competition. Stephenson said the deal will result in an increase in the network capacity AT&T has, which will lower prices. Sohn countered that AT&T is not using its current spectrum holdings effectively. "If AT&T is concerned about its spectrum capacity, it could stop operating three different types of networks, an inefficient system which, according to one analyst, results in 70 to 90 percent of its spectrum being underused," she said in her testimony. "Completely unused is one third of its spectrum in the top 21 markets. Allowing AT&T to buy T-Mobile for the purpose of improving its inefficient networks and upgrading to 4G services would reward AT&T for failing to invest wisely."

Sohn later added that AT&T could use spectrum-bonding technology to get greater efficiency out of its spectrum, but Stephenson retorted that network upgrades take time and that AT&T can simply move its 2G customers wholesale onto newer network technologies, and that if AT&T did so it would likely be appearing before Congress for a whole different reason.

Hesse said if the merger is approved "it clearly would make our position more challenging competitively," and added "it does make us more of a takeover target over time."

Hesse also said the deal would take the wireless industry back to the era in the 1990s before PCS licenses were granted. However, Stephenson argued that there is innovation taking place at every layer of the industry, from network infrastructure to devices, and that the deal will not halt that. "I don't think the merger will slow Steve Jobs from launching the iPhone 5 or 6 or whatever number is coming," he said.

For more:
- see this AllThingsD live blog
- see Stephenson's comments
- see Humm's comments
- see Hesse's comments

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