The deal would mean some bad news for Sprint, which would be the last-place cellular carrier if T-Mobile is removed from its place as the No. 4 carrier in the U.S. It would also make AT&T absolutely huge – bigger than Verizon by a third and Sprint by double – which has Sprint worried would make it unable to compete.
Those are some legitimate concerns, and the lack of competition created by the merger is the primary reason the Department of Justice has filed a suit to block the merger. AT&T has responded that “the facts will prevail in court,” and it reiterated what it has been saying since the beginning: that the merger is a good thing for AT&T, T-Mobile and the country at large. AT&T maintains it needs T-Mobile to help it expand its 4G LTE network (although leaked filings suggest that it’d be about a tenth of the cost for AT&T to just build out the network without the merger) and that the merger will create “thousands of jobs.”
So Sprint commissioned a study to show the contrary to that last contention. Of course, being a study commissioned by Sprint, it just so happens to show exactly what Sprint wanted it to show, but the study does take issue with the Economic Policy Institute’s findings on the merger, which support AT&T in saying that it’ll create jobs.
According to TechCrunch’s story on the matter, the study was conducted by David Neumark, a professor of economics and the director of the Center for Economics and Public Policy at the University of California at Irvine. He found that the “increased jobs” finding is based really on one fact: that AT&T will increase capital investment. The EPI’s findings assume that will create new jobs, but Neumark says it may not be the case if the total effects of the merger are taken into account.
“AT&T recently promised to bring back 5,000 call center jobs that had previously been outsourced abroad,” the TechCrunch story states. “The company also said the merger will result in no call center job losses, though in the official documents AT&T admits that some ‘force reductions’ would occur.”
The EPI also relies on a single figure for its job creation conclusion, which is $8 billion that AT&T will reportedly be investing. Should AT&T invest that full $8 billion, that would undoubtedly create jobs, but it won’t result in a net gain of jobs unless that figure is more than what T-Mobile would have invested on its own without the merger. Meanwhile, if that $8 billion is actually less than the total investment that would have been made, Neumark says the merger would result in a jobs decrease. If the net investment was lowered by $5 billion, Neumark predicts between 34,000 and 60,000 jobs would be lost.
“Since 2002, AT&T has eliminated over 107,000 jobs relative to the growth in employment that would have occurred from the acquisitions that occurred during that time period. This evidence is consistent with AT&T’s past mergers generating job loss,” Neumark wrote.
Of course, there’s much more to consider with the merger and job creation. The reduction in competition and the strain it could put on innovation would also have an effect on jobs creation, as would the network increase AT&T keeps saying the deal is meant to drive.
AT&T, as one would expect, calls the study “woefully flawed,” and points out that assuming T-Mobile would make big capital investments doesn’t make a lot of sense, given that its parent company, Deutsche Telekom, has cut off its funding.
Either way, it’s up to the government to decide what’s next for AT&T, T-Mobile, and by extension, Sprint.