As we approach the House of Representative’s Hearing on the acquisition of T-Mobile USA by AT&T, I have been reflecting on what we heard during and after last week’s Senate Hearing on this topic and am wondering what the House will consider when it is inquiring about the proposed transaction. Here are some questions I would ask:

  • How can we most quickly address changing wireless customer demands?
  • How competitive is the wireless market?
  • Do you think Deutsche Telekom sees a possible future in America considering that Deutsche Telekom has said they are no longer investing in their U.S. business?
  • Is there a historical precedent in the U.S. wireless industry that prices increase following mergers?
  • What will happen to T-Mobile customers and employees with and without the merger?

If I were a Hill staffer responsible for briefing my boss before the hearing, here’s what I would make sure they knew:

  • As time has progressed since Q3 2009, T-Mobile USA’s customer losses have become successively worse. We actually might be seeing the beginning of a carrier in an unrecoverable tailspin with devastating consequences for the entire mobile sector.
    • T-Mobile has been losing more than 1 million post-paid contract customers since Q3 2009. The lone exception was the Father’s Day 2010 “every phone is free” promotion where the sales of a single day lifted an otherwise dreadful quarter to a modest gain for contract customers.
    • Since Q3 2009, T-Mobile has lost almost 350,000 prepaid customers. In most quarters, T-Mobile has only been able to show growth among prepaid customers by combing its T-Mobile-branded prepaid customer numbers with its non-T-Mobile branded wholesale customers.
    • T-Mobile’s positioning in the market has been confusing to customers. In only four years the company has changed its marketing campaigns six times. Nobody knows what the company stands for anymore.
    • If a market is competitive, a company that makes bad decisions gets punished.  They lose customers, revenue and market share to the point where shareholders of and investors in the company will decide to sell the company before it fails in order to recoup some financial value from their investment. If a market is not competitive, companies that make bad decisions are kept alive via artificial life support. Propping up T-Mobile via regulatory fiat is inconsistent with promoting a competitive market.
    • The U.S. wireless industry is very competitive, which means that sufficient consumer demand exists for services, and wireless companies have extra incentive to introduce new innovative services and devices, to keep prices down and grow their customer base. This is a natural, market-driven outcome on which a merger will have very little impact.
    • T-Mobile USA’s parent company Deutsche Telekom has made it clear they plan to exit the U.S. wireless market one way or another.
      • Deutsche Telekom has testified under oath before Congress that is not willing to further invest significantly to make T-Mobile competitive again.
      • If the AT&T acquisition is not approved, Deutsche Telekom will in all likelihood look for another buyer, while customers run to the exits.
      • In the interim, T-Mobile USA will be on life support, with enough money to survive, but not enough money to flourish. It will accelerate to be on a downward path, with insufficient funding to build out its network, and increasingly less competitive devices. A classic self-fulfilling prophecy.
      • Furthermore, T-Mobile USA has enough spectrum for today, but not enough for the customer demands of tomorrow. Without billions of dollars of investment in spectrum the company will not have enough capacity to provide wireless high-speed data to a majority of its current customers.
      • A company whose primary source of financial backing has disappeared and whose parent has decided to sell it operates under a different set of incentives and goals than a growing and successful company.
        • Last year, just as T-Mobile USA rolled out its new 4G network, the company actually reduced its capital investment from $3.6 billion in 2009 to $2.8 billion in 2010. Cutting corners does not make a company successful again.

These questions and facts should be helpful to the Representatives when they are considering the merits of the proposed acquisition.

 

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