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AT&T: The Tommy Flanagan of Telecom

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Last month, Rep. Heath Shuler, Democrat of North Carolina, urged President Obama to ignore the Justice Department lawsuit aiming to block AT&T's takeover of T-Mobile, arguing, as consumer advocacy group Public Citizen explained, "that the deal was needed as a boost to the economy."

Gigi B. Sohn, president and co-founder of Public Knowledge, immediately responded:

We thought the issues of job creation and investment had long been settled. It is perfectly clear that AT&T’s history has been to destroy jobs, not to create them. The company has shed 10,000 jobs a year for the past ten years. There is no reason to believe that the takeover of T-Mobile will do anything to change that dynamic. To the contrary, T-Mobile has created jobs at the same time AT&T has cut them. And by removing T-Mobile’s investment, the amount of money spent on improving the wireless networks will less, not more.

Today, PK released a copy of a letter the organization sent to FCC head Julius Genachowski, which contains "confidential, internal documents" from AT&T -- which have been heavily redacted for public distribution, but are still available to view with a quick Google search -- that "further demonstrate the job-killing nature of this proposed merger" and that "AT&T’s own internal planning contradicts its public case."

Key passage:

If approved, the proposed transaction will lead to less investment, i.e., fewer jobs, in the United States but more investment (and more jobs) in Germany and Europe. In other words, AT&T is essentially seeking to export jobs from the United States to Europe. In particular, AT&T has stated that it expects the transaction to lead to $10 billion in savings from “[a]voided purchases and investments.” At the same time, part of the $39 billion acquisition price is a $25 billion cash payment to Deutsche Telekom, which represents a capital outflow from the United States to Europe. This $25 billion will be used to invest in broadband deployment in Europe, not the United States. AT&T and Deutsche Telekom admit that a key reason for the transaction is that “Deutsche Telekom must dedicate significant capital resources to broadband deployment in Germany and the rest of Europe.” As Deutsche Telekom Senior Vice President Langheim has explained, the transaction will “provide the resources necessary to modernize and upgrade Deutsche Telekom’s core businesses in Europe.” That may be good news in Europe, but it is bad news for the American worker.

David Neumark, an economics professor at the University of California at Irvine, has conducted an analysis that refutes claims that AT&T’s takeover of T-Mobile will create jobs. Professor Neumark assessed the net reduction in capital expenditure by a combined AT&T and T-Mobile, AT&T’s own statements, and AT&T’s record of workforce reduction following prior acquisitions. His study shows that AT&T’s takeover of T-Mobile will almost certainly lead to a direct, overall reduction in American jobs.

AT&T cannot deny the plain truth: if T-Mobile remains a stand-alone competitor, it will continue to create good jobs for thousands of American workers, but it if AT&T’s takeover is approved, thousands of T-Mobile USA employees—engineers, salespeople, managers, clerks, secretaries, and others in Washington state and throughout the United States—will be out on the street looking for work when the nation already faces one of the highest unemployment rates since the Great Depression.

AT&T, you've done Tommy Flanagan proud.
POSITION:  No positions in stocks mentioned.