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Verizon backs AT&T on T-Mobile merger

by Phil Hornshaw

AT&T’s $39 billion merger with T-Mobile has received a lot of negative attention, but Ma Bell has at least one ally in the telecom world that wouldn’t mind seeing it go through: Verizon.

Verizon Wireless is currently the No. 1 cellular provider in the U.S. by subscriber count, with AT&T taking the No. 2 position and T-Mobile coming in at No. 4 (Sprint is third). Merging with T-Mobile will turn AT&T into the No. 1 carrier, but that doesn’t seem to bother Verizon.

“It’s a match that had to happen,” said Verizon CEO Lowell McAdam at an investor meeting today, according to a story from Boy Genius Report. “We need to be very thoughtful on what the impacts would be to the overall industry if this is a way to regulate the industry without actually passing regulation.”

McAdam was referring to one of the things AT&T has claimed as the basis for the merger: the need for additional electromagnetic spectrum licenses that would allow AT&T to provide fast connection speeds as its network grows. Spectrum gets divided among users, so the more customers AT&T has, the more spectrum it needs.

In the meeting, McAdam goes on to say that to him, the AT&T/T-Mobile merger was “like gravity.” T-Mobile had more spectrum available than capital to develop it, and AT&T needed more spectrum, he said. The U.S. government can’t block mergers like this one, that “had to happen,” unless it can provide a solution to the spectrum problem that AT&T currently faces.

So for Verizon, the merger is less about AT&T and T-Mobile and what will become of them, and more about the precedent blocking the merger would set. It’s probably fair to say that at either No. 1 or No. 2, Verizon isn’t too worried about being able to keep up with AT&T; it’s much more concerned about whether this situation could happen to it in the future, and what AT&T’s experience might dictate for Verizon.

For its part, the U.S. Justice Department filed suit to block the merger because it said the deal would be bad for competition in the telecommunications market. Sprint has also sued to block the deal, along with a handful of other smaller telecom competitors.

The DOJ hasn’t slammed the door on AT&T’s merger necessarily, though, and has instead hinted that a settlement might be possible. Reportedly, AT&T is already looking to unload assets to make that happen, including developed spectrum it doesn’t need, to smaller competitors.

It doesn’t seem out of the realm of possibility for this whole story to end with an AT&T-Mobile hybrid, but the company that comes out the other side might be pretty different from the two going in.