Sprint’s Hesse Says AT&T’s Purchase Poses Threat to Industry

Sprint Nextel Corp. (S) Chief Executive Officer Dan Hesse said AT&T Inc. (T)’s acquisition of T-Mobile USA poses a “serious threat” to industry innovation.

“We just cannot let this happen,” Hesse said today at an event in San Francisco. “If the proposed AT&T and T-Mobile merger is allowed to go forward, it can also push the wireless industry from competition to duopoly.”

AT&T said March 20 it agreed to buy T-Mobile from parent Deutsche Telekom AG (DTE) for $39 billion, combining the second- and fourth-largest U.S. wireless providers. The deal needs approval from the U.S. Federal Communications Commission and Justice Department, and is to face hearings in Congress.

Hesse, whose company is the third-largest U.S. wireless provider, said the merger would put control of 80 percent of the wireless industry revenue into the hands of the two carriers, the combined T-Mobile-AT&T and Verizon Wireless.

He said regulators should consider what impact the merger will have on consumer prices as well as innovation. The CEO, who has starred in Sprint’s television commercials, reiterated comments made by the company’s vice president of government affairs last month.

The merger could restrict access to device makers among smaller wireless companies, said Hesse. With the buying power of the two largest wireless companies, “they could restrict access to some of the cool devices,” he said.

FCC, Justice Department

“Given that Sprint is a major competitor to AT&T in the hyper competitive wireless market Mr. Hesse describes, no one should be surprised that they would oppose this merger,” said Jim Cicconi, senior executive vice president of external and legislative affairs for AT&T, in an e-mailed statement. “This hyper competitive market will not become less so simply because of one transaction.”

Reid Walker, a spokesman for Bellevue, Washington-based T- Mobile, declined in an e-mail to comment.

The FCC and Justice Department will work on parallel tracks and coordinate with one another, said a U.S. official this week, declining to be named because Dallas-based AT&T hasn’t yet formally submitted the purchase for approval.

The FCC’s chief economist, Jonathan Baker, said last month that the deal raises questions about whether it would lead to higher prices for consumers.

AT&T has said it expects regulators will require it to divest wireless spectrum and subscribers to win approval for the acquisition, a person with knowledge of the situation said last month.

Hesse declined to say if Sprint would bid for any assets AT&T has to divest as a result of the regulatory process.

Sprint, based in Overland Park, Kansas, fell 15 cents, or 3 percent, to $4.81 at 4:02 p.m. in New York Stock Exchange composite trading. The shares have risen 14 percent this year. AT&T rose 36 cents, or 1.2 percent, to $30.65 in New York. Deutsche Telekom rose 18 cents, or 1.8 percent, to 11.26 euros in Frankfurt.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net; Greg Bensinger in New York at gbensinger1@bloomberg.net

To contact the editor responsible for this story: Thomas Giles at tgiles5@bloomberg.net; Peter Elstrom at pelstrom@bloomberg.net

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