Some tough questions to T-Mobile CEO John Legere

T-Mobile US CEO John Legere faced tough questions from lawmakers on Wednesday about how the $26 billion deal to buy Sprint would affect wireless prices and telecom jobs in rural America, Reuters reported.
T-Mobile and Sprint merger
The deal to combine the No. 3 and No. 4 U.S. wireless carriers, struck in April, has received national security clearance, but still needs approval from the Department of Justice and the Federal Communications Commission.

There are several questions.

First, the combination of T-Mobile and Sprint will reduce the number of active telecom operators to three from the present two. There is some fear that the new T-Mobile will stop aggressive pricing to take on AT&T and Verizon.
Representative Mike Doyle, who chairs the House of Representatives Energy and Commerce Committee panel holding the hearing, raised worries about the deal because the U.S. wireless market has just four main carriers.

Second, the US wireless industry would lose jobs following the merger. CompTIA said the telecom category shed an estimated 2,000 jobs in January alone.

“It’s hard to think of one deal where consolidation did not result in people losing their jobs, prices going up and innovation being stifled,” Doyle said.

Representative Billy Long, a Republican, expressed concern about lost jobs in his Missouri district. Representative Dave Loebsack, a Democrat, pointed to job losses in Iowa after T-Mobile’s acquisition of Iowa Wireless last year and said T-Mobile’s plan to buy Sprint made him very concerned about potential negative effects on Iowa.

Representative Frank Pallone, a Democrat, said T-Mobile had sent call center jobs overseas in 2012 and asked for legally enforceable assurances that the new jobs touted by T-Mobile US CEO John Legere would not be sent offshore once the deal wins approval.

Legere defended the $26 billion deal, arguing that it will create telecom jobs and help with the construction of the next generation of wireless networks. He said the merged company would have more capacity which would lead to a push to lower prices.

“This is a unique merger in that there will be a significant increase in supply,” Legere said. T-Mobile previously said it would not increase wireless prices for three years in order to win support for the deal. T-Mobile never said it would not compromise on the quality of the services.
Industry analysts say that the company can always introduce 5G mobile services at any price and make revenue.

Legere has received support from representatives Anna Eshoo, a Democrat, and Steve Scalise, a Republican.

Legere pointed to the company’s history of aggressive pricing in the US telecom market. T-Mobile would need 11,000 new employees by 2024 and pledged to compete hard on building the 5G mobile network. There is no answer from T-Mobile, which increased its revenue over the years, on the job additions in the last two years.

He pledged to create 5G without using networking equipment from Huawei Technologies or ZTE, two Chinese telecom network suppliers distrusted by U.S. national security experts. Does it mean that both Nokia and Ericsson ensure security to the nation? Nokia and Ericsson use components from several countries including China.

T-Mobile has faced criticism from unions and consumer advocates. Rural operators have been the fiercest opponents.

Carri Bennet, general counsel at the Rural Wireless Association, said the merger will force rural Americans to pay more money for wireless services, especially if they contract with a mobile virtual network operator who buys wholesale access to Sprint’s network and re-sells it.

She said that Sprint is the only one of the four carriers that offers anything approximating commercially reasonable roaming rates to rural carriers. “The merger should be denied,” she said.

Communications Workers of America President Chris Shelton told the committee the deal would kill American jobs, lower wages, and raise prices.

Consumer advocates have said that the poorest wireless customers will be disproportionately hurt by the deal since Sprint and T-Mobile have a big market share in prepaid plans.

A group of eight Democratic U.S. senators and independent Senator Bernie Sanders urged the Justice Department and FCC on Tuesday to reject the deal, saying monthly bills could rise as much as 10 percent.

Lawmakers who signed the letter include Sanders, Amy Klobuchar, Sherrod Brown, Kirsten Gillibrand, Elizabeth Warren and Cory Booker.