Sprint CEO Dan Hesse said telecom mergers will still happen even if the Justice Department successfully blocks AT&T’s deal, as both sides beef up for a showdown next year.
Hesse, who has been outspoken against the merger since its inception, said he doesn’t think the DoJ’s lawsuit against AT&T will prevent future consolidation in the industry. The Sprint CEO explained the DoJ is concerned about the merger’s effects on overall competition and innovation, not about the merger itself, which would reduce major wireless carriers in the U.S. from four to three.
“I don’t believe that what the DOJ said in any way, not even a little bit, should be viewed as we want to keep four [major carriers].” Hesse said at an investor conference. “My view is [the DOJ] would look at other consolidation very differently.”
A successful merger with T-Mobile would leave AT&T with 130 million subscribers and give Verizon and AT&T control of 80 per cent of all U.S. wireless contracts. Hesse believes the lopsided nature of these results is the DoJ’s main reason behind wanting to block the deal, not the number of carriers that would remain as a result of it.
Hesse denied Sprint may merge with T-Mobile, but says he believes the DoJ wouldn’t object if Sprint and T-Mobile formed one company to more directly compete with AT&T and Verizon. Hesse maintains the DoJ would even look favourably on such a deal, since it would not involve two carriers pricing everyone else out of the market.
Future consolidation in the wireless industry may not be difficult to execute if Hesse’s theory is correct. Analysts expect Google and Motorola’s merger to go through without a hitch, likely because its approval will not result in a drastic shift of power to create an industry duopoly.
According to Hesse, if the DoJ is successful in blocking the merger, this decision may still permit other major shifts or consolidations in the wireless industry, including those involving Hesse’s own company.
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