Sprint CEO Says AT&T/Tmo Merger Will Stifle Innovation

The CTIA Wireless show kicked off in Florida firmly under the shadow of AT&T's announcement that it would acquire T-Mobile USA. The event was always set to focus on how the LTE landscape would evolve in North America, but all the setpiece presentations about 4G devices, services and roll-outs were muted by the chatter about the merger of the two GSM cellcos.

Focal Points:

• Some of this was very premature, especially speculation about which new devices (especially iPhones) T-Mobile users would be able to access. The deal is likely to take a year to complete, and could still be killed by antitrust concerns, so eager TMo customers should wait until next year's CTIA for real information.
• The two main CDMA operators leapt in with more reasonable, if predictable, reactions, as Verizon Wireless' chief denied the firm would need to retaliate by bidding for Sprint, and Sprint itself raised fears of lack of competition and innovation. Sprint CEO Dan Hesse, widely supposed to have his nose out of joint following his own merger talks with the Deutsche Telekom arm, said during his keynote address: "I do have concerns that it would stifle innovation and too much power would be in the hands of just two players." To applause, he claimed consumers would suffer.
• His counterpart at Verizon Wireless, Dan Mead, was taking the nonchalant approach, insisting rather disingenuously that he was "not concerned" by the merger or the prospect of less competition. "We are in a very innovative environment and will continue to be so," he said. Unlike Hesse, Mead could say his company had never been interested in TMo and also denied that a Sprint bid was required to keep up with an enlarged AT&T. "We are extremely confident with our assets that we can deliver for our customers. We are going to be observers. We feel very good about our spectrum position," he during a panel. He had previously told Reuters: We're not interested in Sprint. We don't need them."
• Verizon has some cause for complacency. It has a credible LTE headstart and a strong spectrum position for at least the next few years and it can hope to take advantage of the inevitable uncertainties surrounding the proposed AT&T deal, in terms of its dealings with device partners and large enterprises. Sprint, by contrast, faces a double nightmare - the prospect of a far larger AT&T to contend with, and the closing-down of its own most likely merger option. It continues to mull its own choices for 4G, and possible combinations of using its own spectrum for LTE and teaming with Clearwire and/or LightSquared.
• LightSquared itself, which had also had hopes of a T-Mobile partnership, did announce a deal with regional flat rate carrier Leap Wireless. This intensified speculation that the wholesale LTE operator, which says it already has three carriers signed up, will work with MetroPCS, the other flat rate specialist and Leap's national roaming partner in CDMA. MetroPCS has its own LTE build-out but admits it will need more spectrum capacity soon and has spoken positively about the LightSquared route.
• Leap, like its rival/partner, still says it will build its own LTE in some of its regional footprint, having acquired spectrum in AWS and 700MHz auctions. It will overlay some of its CDMA networks, starting this year, and will use LightSquared's system for roaming outside its own coverage areas, and in future to add more capacity.
• The cellco's CEO Doug Hutcheson said: "Our business progress demonstrates how data services are increasingly important to our customers, as evidenced by our customers' significant uptake of smartphones and data-focused, higher ARPU service plans. We believe that the broad coverage resulting from this business agreement will enhance our ability to offer compelling products and services and allow us to strengthen our retail relationships and distribution capabilities. It will also give us flexibility to access additional 4G capacity where needed as data-centric devices become more popular and require more and more bandwidth."

Editor’s Note: While this is an interesting development it is not surprising. The customers are demanding high-speed access to all types of data content including streaming, real-time video. The vendors are doing themselves a disservice with all of the false and misleading marketing hype around 4G networks.

Looking at the recent commercials where T-Mobile was comparing itself to AT&T, purporting itself to have a better network with higher streaming capabilities. One can see why AT&T is merging with T-Mobile.

The challenge will be in the merge itself, as it will cause challenges in both infrastructure integration and cultural integration. In other words, the consumers will not see any benefit in the short-run.