CWA Endorsement Seen as Critical in AT&T’s Push to Buy T-Mobile

"CWA is important because it makes it easier for Democrats to support the merger, even if they have raised concerns in the past about a carrier duopoly in wireless,” said an executive with a wireless carrier that opposes the deal. “It could prove critical.” But a lobbyist with Republican ties noted that CWA’s support could hurt with some Republican offices on the Hill.

"CWA was one of the very few groups outside AT&T who were given any advance notice of the deal,” said an executive of a public interest group. “Its press release came out within an hour of the announcement.” AT&T is the only wireless carrier with a union contract, the source noted. “It is proceeding on the theory that it may mean fewer jobs, but more of the remaining jobs will be union jobs."

The effect of the CWA endorsement remains to be seen, said Public Knowledge Legal Director Harold Feld. “Using traditional political calculus, having union support is good for AT&T because it may help with Democrats who traditionally oppose big mergers,” he said. “But it may backfire with tea party Republicans in the House who regard unions as job killing socialists and supporters of Democrats. Tea party Republicans are already sore at AT&T for supporting the FCC’s net neutrality rules. Now AT&T is embracing unions. I expect some of the tea party freshman may start to ask AT&T, ‘Whose side are you one?'"

"It’s not a small matter to have unions supporting a controversial deal like this,” said MF Global analyst Paul Gallant. “Shrewd move by AT&T."

"Early support of the AT&T/T-Mobile merger by organized labor, the NAACP and the Latino community -- key components of the Democratic base -- contributes at an early stage to an evolving political dimension of the government review process that could loom large as we move further into the 2012 election cycle,” said Jeff Silva, a Medley Global Advisors analyst. “Organized labor is important not only as a dependable major campaign contributor to Democrats, but it also plays a key role in get-out-the-vote efforts. That could be particularly important if Democratic voters who have become disenchanted with Obama, though not ready to endorse a GOP candidate, decide to stay at home in the next presidential contest. Doing so could help an underdog GOP presidential candidate."

There should be thorough regulatory review of the merger and examination of all the consumer issues raised, George Kohl, a senior director at CWA, said in an interview Thursday. Unlike T-Mobile, under an agreement with CWA AT&T remains neutral on unionizing efforts, he said. T-Mobile owner Deutsche Telekom is a union-friendly company in Germany, but CWA has been unable to establish representation at T-Mobile USA, Kohl said. T-Mobile has said no group of employees has chosen to be represented by a union despite CWA’s periodic efforts to organize (CD Nov 18/09).

The AFL-CIO said it will work with the CWA and with ver.di, the counterpart union in Germany, to ensure that T-Mobile USA workers “enjoy better employment security and a management record of full neutrality towards union membership and collective bargaining.” And the U.S. hasn’t made high speed broadband a priority and has fallen behind other countries in speeds and applications, Kohl said. The acquisition is good for broadband buildout and favorable for economic competitiveness, he said.

Meanwhile, Deutsche Telekom CEO Rene Obermann and AT&T CEO Randall Stephenson met Wednesday with FCC Commissioners Michael Copps, Robert McDowell and Meredith Baker to discuss the merger, FCC officials confirmed.

The deal also came up repeatedly in a CTIA panel discussion Wednesday about spectrum legislation in Congress and in the states. David Taylor, managing partner of Capitol Solutions and a former OMB official, said the transaction “complicates things from a lot of perspectives” and has to be viewed as a “game changer.” But Taylor views the budget and the federal government approaching its debt limit as likely to spur action on spectrum legislation. Spectrum auctions and off-shore drilling receipts are the only alternatives that the government has to raise billions of dollars without raising taxes, he said. “Budget needs have driven wireless telecom policy before and they're likely to do so again,” Taylor said. Most previous legislation involving auctions has advanced in a budget reconciliation bill, he said.

"I don’t think it changes much,” Rebecca Arbogast, analyst at Stifel, Nicolaus said of the deal. “D-block was already kind of set, right?” she said. AT&T, Verizon Wireless and public safety worked together and had already “derailed” a move to auction the band rather than reallocate it to public safety, she said. “You take T-Mobile as a voice to auction [the D-block] out of a conversation that was already leaning in that direction anyway.”

Arbogast said the merger “complicates” the push for legislation to give the FCC authority to hold incentive auctions. “I can’t figure out which way it cuts,” she said. “At the end of the day maybe there wasn’t going to be any legislation anyway so it doesn’t really matter.” Arbogast said T-Mobile, with its spectrum position, couldn’t have waited for an auction of broadcast licenses to make a play for spectrum.

Minnesota state Rep. Joe Atkins, a Democrat, said he’s concerned about the purchase, but his constituents likely won’t be, unless it reduces wireless competition. “If you have … very limited competition, that’s not good for consumers,” he said. “Our consumers, our constituents will start to contact us in the event that we're down to a single carrier, a couple of carriers, and the price begins to ratchet up.”

Alaska state Rep. Kurt Olson, a Republican, said the purchase won’t draw attention in Alaska, where T-Mobile doesn’t operate. “I've got a town hall meeting on Saturday and this will not be a question that anybody asks,” he said. “It'll be, ‘What will you do about the price of gasoline?’ It will be questions like that."

Citadel Securities, meanwhile, said in a research report AT&T appears likely to have to sell off big parts of T-Mobile’s subscriber rolls, and that could benefit Sprint Nextel. “AT&T has said it expects to have to make some concessions to get regulatory approval, but its initial working assumption is that no divestitures will be required,” the report said. “We think this is likely an exaggeration, and that AT&T may, in fact, be ready to make very significant divestitures.” An AT&T filing Monday, suggests that the carrier is willing to sell off as many as 40 percent of T-Mobile’s subscribers, Citadel said. “We think AT&T may not be opposed to divesting even more in order to get the deal closed.”