There has been yet another twist in the AT&T Inc. (T) and T-Mobile merger story. Recently, the Communications Workers of America (CWA) protested against the Department of Justice (DOJ) after the latter blocked the proposed merger. Earlier in March, AT&T was keen to bring T-Mobile under its fold in a deal that would to be the largest in the wireless industry since 2004.
The workers union, representing more than 700,000 employees in the industry, favors the merger as it would create more than 96,000 jobs. Post merger, AT&T would expand its 4G Long-Term Evolution technology to cover almost 97% of the U.S. population. This implies that 55 million more Americans, mostly in rural and smaller communities, will come under its coverage. Additionally, the deal, which is still under review by the Federal Communications Commission, will aid in acquiring more radio spectrums.
The CWA also disapproves all the claims made by Sprint Nextel Corp. (S), which is currently the third-largest U.S. wireless carrier in the industry. Sprint was the first to oppose the deal citing higher prices, job losses, less innovation and unfair competition.
The CWA has hinted that this is a case of sour grapes for Sprint, after its failure to successfully bid for T-Mobile. The union sees the deal as instrumental in job creation that would augur well for the unemployment scenario and revive the U.S. economy. The CWA therefore, asserts that the U.S. government should support the transaction instead of blocking it.
Nevertheless, the DOJ’s suit is being favored by other prepaid wireless players such as MetroPCS Communications Inc. (PCS) and Leap Wireless International Inc. (LEAP), small wireless carriers, tower companies, handset and infrastructure equipment vendors, and wireless ecosystem suppliers for business reasons.
While we await the final decision on this much hyped merger, we prefer to maintain our long-term Neutral recommendation on AT&T. The company retains the Zacks # 3 (Hold) Rank for the short term.
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