August 31, 2011
If the outcome of the Justice Department antitrust suit filed Wednesday to stop AT&T’s $39 billion takeover of Deutsche Telekom’s T-Mobile hinged purely on its effect on competition, there wouldn’t be much doubt about the outcome.
But AT&T threw a wild card into the mix earlier this week. On the eve of the Justice Department suit, the company promised to return 5,000 call center jobs to the U.S., which had previously been outsourced abroad. The company also committed to maintaining the two companies’ existing call-center workforce of 25,000.
In today’s job-hungry political environment, that could be a persuasive argument.
It’s a point being pressed hard by the Communications Workers of America, the union that represents about 40,000 workers at AT&T – the only unionized carrier in the cell phone industry. The union commissioned a study by the left-leaning Economic Policy Institute earlier this year that showed the merger would create anywhere from 55,000 to 96,000 new jobs in the U.S. by allowing the combined companies to build out AT&T’s notoriously poor performing national network.
The proposed merger of the second- and fourth-largest cell phone carriers would leave the U.S. with essentially three companies divvying up the mobile telecommunications market. Just two -- the newly combined AT&T and Verizon Wireless – would account for 230 million subscribers, or about 80 percent of the market.
The combination has been slammed by consumer groups like Consumers Union and the Consumer Federation of America. They charge the merger would result in higher prices, fewer choices, and lower-quality service, which is already notoriously poor in the U.S. compared with other advanced industrial nations.
Those were the concerns raised by the Justice Department in its antitrust suit, which called T-Mobile “a value provider that even within the past few months had been developing and deploying ‘disruptive pricing’ plans.” The complaint further said: “AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market.”
Yet the deal could still survive. The government could drop its complaint if AT&T agrees to offer concessions on pricing, divest operations in some highly concentrated markets, or makes commitments to more consumer-friendly policies on roaming or contract termination fees.
The Communications Workers union argues that failure to consummate the merger will force T-Mobile to send more of its jobs abroad. Officials from Deutsche Telekom recently testified on Capitol Hill that it will no longer invest in its U.S. operations.
“This suit could open the floodgates to the outsourcing of American jobs,” said Charles Porcari, a spokesman for the CWA. He also said that T-Mobile’s non-union workforce would not automatically become union members but would “have the right to choose representation.” AT&T, unlike many other U.S. employers, remains neutral during union elections at its facilities.
In a prepared statement offered in response to the Justice Department suit, AT&T General Counsel Wayne Watts expressed disappointment with the suit and claimed the company had no indication that it was coming. AT&T and Deutsche Telekom shares plunged Wednesday on the news, while the stock price of its competitors soared.
“We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed,” Watts said. The company said the merger would enable it to build out its broadband network to cover an additional 55 million Americans, resulting in “billions of additional investment and tens of thousands of jobs at a time when our nation needs them the most.”
Parul Desai, policy counsel for Consumers Union, scoffed at AT&T claims that its investment plans required the merger. She pointed to a leaked internal memo from the company that showed the cost of completing its national network would cost less than $4 billion.
“All the benefits AT&T is claiming can be performed without the merger,” she said. “They could build out the network for a lot less than the $39 billion they’re paying for T-Mobile.”