Hearing mixed messages over the AT&T-T-Mobile merger

While consumer groups seem universally opposed to the merger of AT&T (NYSE:T) and T-Mobile (NYSE:DT), the two operators’ actual competitors are more of a mixed bag. Depending on where they stand in relation to AT&T and T-Mobile, they seem to see different opportunities and different dangers if the AT&T and T-Mobile were allowed to create a single mega-carrier.

Sprint (NYSE: S) is the only major operator that has come out unequivocally against the deal with CEO Dan Hesse using whatever pulpit he can find to denounce it (CP: Sprint’s Hesse weighs in on AT&T-T-Mobile deal). Verizon Wireless (NYSE:VZ, NYSE:VOD) has publically remained neutral, but it’s easy to get the impression it’s actually in favor of the merger. Verizon’s primary concern is what impact a failed merger or a successful merger loaded down with conditions would have on its own ability to buy competitors and spectrum in the future. “Our view is that the government is perfectly within its legal rights to look at this deal,” said Charla Rath, the carrier’s vice president of wireless policy development, at the recent TIA 2011 event (CP: Genachowski, Hutchison push hard on spectrum). “Our concern is they could add additional conditions [that would impact] the remaining carriers or other players in the industry.”

Indeed, Verizon may not have any big M&A plans in the offing, but Verizon officials readily admit they’ll need to hunt about for more spectrum in the future. Whatever AT&T and T-Mobile’s fate is today will be, Verizon’s fate will be tied to the outcome if in the future if it tries to buy LightSquared or even Sprint (Unfiltered: Verizon’s take on the AT&T merger: Is the enemy of my enemy my friend?).

The reactions of the regional operators, however, have been more puzzling. The Rural Cellular Association and the Rural Telecom Group have come out firmly against deal, as have some of the smaller Tier II operators like Cincinnati Bell (Unfiltered: AT&T files T-Mobile paperwork with FCC, while deal’s opponents mount their offense). But the larger Tier II operators have sent some mixed signals.

MetroPCS (NYSE:PCS) has said it could ultimately benefit from the merger as it would require spectrum divestitures in major markets Metro could pounce on (CP: MetroPCS unopposed to a combined AT&T-T-Mobile). Yet MetroPCS has also taken up with Sprint and rural carrier groups in some of their anti-merger efforts such as asking the FCC to review all of AT&T’s proposed acquisitions in a single proceeding (Unfiltered: Operators want FCC to take on all of AT&T’s acquisitions at once).

Leap Wireless (NASDAQ:LEAP) has done much the same. Earlier this week Leap issued a statement making it fairly clear it thinks the merger would stymie competition and negatively impact small carriers, (Briefing Room: Leap opposed proposed AT&T acquisition). Yet like MetroPCS, Leap officials have said they see the opportunity to expand in its current markets or into new markets in the merger’s aftermath.

It seems the operators are talking at cross purposes. It’s hard to mount an effective offense against the merger if you’re talking about how you’ll benefit from it in the next breath. I suspect the reason for this schizophrenia is because all of the operators know this deal is inevitable. AT&T never would have gone through the expense, the effort or the public relations nightmare of pursuing this acquisition unless it was positive it would meet regulatory muster. The only thing that could stop it is an act of political will, which is why AT&T is focusing so much of its efforts on lobbying. At Congressional hearings this week, AT&T seemed to be getting lawmakers on its side—both Democrats and Republicans.

I don’t think a single operator wants to see this deal go through. And if there was any chance at stopping it they’d probably present a unified front with the sole exception of Verizon, which is more concerned with how the deal goes through. But knowing there is little they can do to stop it, they’re now focusing on the post-merger spoils. Everyone has an angle in this scenario. Verizon will see the way cleared for its future acquisition plans. The regional operators can pick up the spectrum pieces. Even Sprint stands to benefit. Knocking T-Mobile out of the market will leave it free to continue its focus on the prepaid and lower-tier consumers while facing no nationwide competition (CP: Are we witnessing the resurgence of Sprint?).

The only operators who can’t play the angles are the rural providers who can’t benefit from any divested spectrum since it will be primarily in large and mid-sized markets. At the same time, AT&T buying a largely urban area-focused T-Mobile won’t present any more of a competitive threat to rural operators than it does today.

The operators who are really going to hosed are the rural GSM operators, whatever’s left of them. Rather than have two nationwide GSM operators to pit against each other for competitive roaming agreements there will be only one. The new AT&T will be free to dictate rates.