AT&T Boss: Sprint-T-Mobile Shouldnt Cut the Regulatory Mustard

**Editor’s Note: Please click here for a recap of the biggest communications mergers in Q1 2014.**

Sprint hasn’t even made an official bid for T-Mobile, but it’s already the most talked about acquisition of the year.

AT&T CEO Randall Stephenson weighed in on Tuesday, and as you might expect, he’s not too keen on the rumored deal, citing how his company ran into regulatory roadblocks trying to buy T-Mobile nearly three years ago.

“The problem as I see it is the way the government shut our deal down,” Stephenson said at an Economic Club event in Washington, D.C., as quoted by Re/code. “They wrote a complaint and a very specific complaint. You’re consolidating the industry from four to three national competitors.”

That may have been a big concern to regulators in 2011, but they also expressed fears that AT&T might grow too large in the deal. If a Sprint-T-Mobile tie-up is approved, it will leave three wireless giants of roughly the same size.

Multiple unconfirmed reports have Sprint buying T-Mobile for $32 billion, but the official announcement isn’t expected until next month.

Sprint has started to see some of its subscriber losses shrink in the last couple of quarters, while T-Mobile collected more new subscribers last quarter than AT&T and Verizon Wireless combined. It’s a momentum that credit agency Moody’s worries could wane in the months following a merger announcement.

“The two companies could lose momentum and market share during what is likely to be a long and difficult regulatory approval process,” noted Moody’s lead analyst Mark Stodden. “A deal could lead to distracted managers and employees, similar to what happened when T-Mobile and AT&T announced and then abandoned their combination in 2011. Both companies lost market position during the deal review process while Verizon Wireless, undistracted from its core operations, continued its crisp execution.”

While a combined Sprint-T-Mobile would be almost as big as Verizon and AT&T, Stodden believes it will be burdened by “an inferior infrastructure, weak costs structure and (arguably) an unsustainable capital structure.” The need to keep prices low for customers, he added, might make improving margins challenging in the short run. Yet, what often appears to be high risk winds up providing a high reward.

Follow senior online managing editor @Craig_Galbraith on Twitter.

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