Sprint Rebukes Claims that AT&T/T-Mobile Merger Will Create Jobs
One of the main selling points AT&T has been touting for its merger with T-Mobile has been the creation of new jobs, a point reiterated in their response to a Department of Justice complaint against the proposed deal. It’s easy to understand why AT&T would throw around the J word in light of our current economic situation. Jobs are at a premium, and as the US government scrambles to address unemployment issues a proposal that puts new jobs on the table should, theoretically, gain some support. But Sprint, one of the main forces working to squash the deal, has independently researched AT&T’s claims and concluded that the merger will destroy more jobs than it creates. The final figure worked out by David Neumark, directed of UC Irvine’s Center for Economics and Public Policy, amounts to some 34,000 to 60,000 jobs lost.
Sprint and Neumark point towards reduced capital expenditures, which AT&T hopes to lower by $10 billion in the wake of a merger with T-Mobile. His logic? Less money equals less jobs. Makes sense, right? Even with additional investments arising from the deal, the sort of money needed to create jobs rather than cut them simply wouldn’t be there. Senior vice president of Sprint Government Affairs remarks, “the DOJ and FCC should not be fooled by additional false claims, and neither should the American public. This deal is bad for consumers, bad for competition, and bad for the economy.”
The verdict is still out on whether the proposed acquisition receives approval, but the tide seems to be changing in recent weeks, and not in AT&T’s favor. Read the full report below.
New Study Debunks AT&T’s Job Claims
Study by Noted Independent Labor Economist Reveals AT&T’s Planned $10 Billion Cut in Total Capital Expenditures, in Addition to its Own History as a Job Reducer, Would Result in Thousands of Job Losses
Editor’s note: Sprint will host a media briefing via conference call with the study’s author on Thursday, Sept., 1, 2011 at 11 a.m., Eastern Time. Members of the media may dial (866) 225-8754, and, when prompted say, “Sprint Conference Call,” to join.
WASHINGTON & IRVINE, Calif.–(BUSINESS WIRE)–A new study, commissioned by Sprint (NYSE:S), was released today by David Neumark, professor of Economics and director of the Center for Economics and Public Policy at the University of California at Irvine. This independent analysis debunks assertions made by AT&T that their proposed takeover of T-Mobile would be good for American jobs. The study reveals that this acquisition will almost certainly lead to the elimination of thousands of American jobs as the company works to lower its capital expenditures by $10 billion.
“This study shines definitive light on yet another false premise that AT&T is using to try to sell this damaging deal to regulators and the American public, and offers evidence that AT&T’s acquisition of T-Mobile could have a negative impact on the overall American economy”
The study directly refutes claims made by AT&T, based on a memorandum by the Economic Policy Institute (EPI), that the merger would be a net job creator. The EPI analysis, Neumark notes, is groundless.
“EPI’s claim that the AT&T/T-Mobile merger would create jobs is completely unfounded,” Neumark concludes. “It ignores potential reductions in capital expenditures that T-Mobile would have undertaken. Indeed, AT&T has told the federal government and its investors that the merger would lead to reduced capital expenditures – which by EPI’s own logic would lead to fewer jobs. And AT&T has acknowledged there would be other job reductions resulting from the merger.”
In his analysis, Neumark notes the EPI memorandum bases its job projection on AT&T’s claim that the merger would result in an increase in capital investments of $8 billion. However, Neumark observes that this $8 billion figure is not an estimate of the net effect of the merger. It ignores the capital expenditures that would otherwise have been made by T-Mobile (an average of nearly $3.4 billion in each of the last three years.) Moreover, AT&T has been promising cuts in capital expenditures to Wall Street.
“There may be some new investment generated by the merger, and this may be reflected in the $8 billion figure that AT&T has cited in the press. But this is just a gross figure. There will also be diminished investment elsewhere, and the only thing that matters for job creation from changes in investment that would result from the merger is the net change in capital investment. It is a glaring distortion of the effects of the merger to count only increased sources of investment in projecting employment effects, while ignoring sources of decreased investment,” the study says.
Assuming AT&T’s net capital investment falls by $5 billion, it would result in job destruction of 34,000 to 60,000 using EPI’s own analysis, Neumark concludes.
Further, Neumark noted that creating jobs through mergers would be completely inconsistent with AT&T’s own history. The study reports that, since 2002, AT&T has been responsible for the elimination of more than 107,000 job-years relative to what would have happened had AT&T’s employment simply grown by the number of employees acquired through several acquisitions. This is also consistent with what AT&T has been sharing with the investment community; that the merger would entail employment reductions from rationalizing operations.
“This study shines definitive light on yet another false premise that AT&T is using to try to sell this damaging deal to regulators and the American public, and offers evidence that AT&T’s acquisition of T-Mobile could have a negative impact on the overall American economy,” said Vonya McCann, senior vice president, Sprint Government Affairs. “The DOJ and FCC should not be fooled by additional false claims, and neither should the American public. This deal is bad for consumers, bad for competition, and bad for the economy.”
Sprint retained Charles River Associates to analyze the competitive effects raised by AT&T’s proposed acquisition of T-Mobile, and their analysis was subsequently submitted to the Federal Communications Commission on May 31, 2011, as part of Sprint Nextel’s Petition to Deny. Neumark is a professor of Economics with a focus in Labor, director of Graduate Studies, and director of the Center for Economics and Public Policy at the University of California, Irvine. He is also a senior consultant to Charles River Associates. While funding for the economic study was provided by Sprint Nextel, the analysis and conclusions were independently done by Neumark.