Merger 'Synergies' Force T-Mobile To Pay $200 Million Fine For Sprint Falsehoods

from the synergies dept

T-Mobile has been forced to pay $200 million because Sprint took taxpayer money it didn't deserve to "service" customers that apparently don't exist.

In an announcement this week from the FCC, T-Mobile will pay a $200 million penalty to the U.S. Treasury to resolve an investigation into Sprint, a company T-Mobile acquired (against the recommendations of most antitrust experts) for $26 billion earlier this year. According to the FCC, Sprint was taking taxpayer money to serve 885,000 Lifeline subscribers that apparently didn't exist. The Lifeline program, started under Reagan and expanded by Bush Jr., provides a modest $9.25 subsidy users can use for broadband, phone, or wireless service. It's worth noting Trump's FCC has repeatedly tried to undermine the program.

When there are instances of fraud discovered by others, and too obvious to ignore, the FCC sometimes acts. This latest fine, the biggest in FCC history for this sort of inquiry (not that this is saying much for a historically timid agency), was the end result of an investigation started by the Oregon Public Utility Commission. From the FCC:

"The Bureau’s investigation concerned Sprint’s compliance with Commission Lifeline rules, including the “non-usage” rule. Under this rule, providers of “free” service may only be reimbursed for a Lifeline subscriber if that subscriber has used the service at least once in the past 30 days, and such providers must de-enroll subscribers who don’t use their phones after giving them 15 days’ notice."

Fairly consistently however, carriers are allowed to game the system for years, taking taxpayer money for customers that may not even exist. AT&T was dinged by the FCC five years or so ago for "forgetting" to audit its Lifeline subscriber rolls and purge them of non-existent or no-longer-eligible customers, allowing it to continue taking taxpayer money from a fund intended to aid the poor. As with other instances of dodgy telecom behavior, the fines doled out quite often don't quite line up with the money lost. And quite often they can be negotiated down over time, sometimes to nothing.

Technically, the settlement also closes the FCC's inquiry without any official confirmation of wrongdoing, even though Sprint admitted taking FCC reimbursements for subscribers no longer on the Lifeline program. Sprint claims the error was due to a "software bug" (whoops-a-daisy), though a major one: the impacted customers accounted for 30 percent of Sprint's total Lifeline subscriber base, and around 10 percent of the entire Lifeline program's subscriber count. Surely Sprint, which no longer technically even exists, has learned its lesson.

Filed Under: fcc, fines, lifeline, oregon, puc, subsidies, synergies

Charter Spectrum Jacks Up Rates (Again) Thanks To Merger 'Synergies'

from the do-not-pass-go,-do-not-collect-$200 dept

When Charter Communications (Spectrum) proposed merging with Time Warner Cable and Bright House Networks in 2016, the company repeatedly promised that the amazing "synergies" would lower rates, increase competition, boost employment, and improve the company's services. Of course like countless telecom megamergers before it, that never actually happened. Instead, the company quickly set about raising rates to manage the huge debt load. And its service has been so aggressively terrible, the company recently almost got kicked out of New York State, something I've never seen in 20 years of covering telecom.

Cities like Lexington, Kentucky continue to explore their legal options in efforts to hold Charter accountable (something it's clear the Trump FCC won't do). Charter, meanwhile, has informed many of these users that they'll be seeing yet another rate hike in November across the company's entire, 41-state territory. All told, users will pay at least $100 more for the same service annually, thanks in part to increases in several of the sneaky fees Charter routinely tacks on to user bills to jack up the advertised price post sale:

"Broadcast TV surcharge will increase from $8.85 to $9.95/month, Charter said, "This reflects costs incurred from local broadcast TV stations."

• Spectrum receivers will increase from $6.99 to $7.50/month.

• An increase from $54.99 to $59.99/month for Spectrum Internet for current customers who subscribe to Spectrum TV.

• An increase from $64.99 to $65.99/month for Spectrum Internet for current customers who do not subscribe to Spectrum TV."

Modest hikes, but they add up. It's worth noting that that "Broadcast TV fee" is simply a part of the cost Charter pays for programming, broken out of the bill, and tacked on below the line to help covertly jack up the advertised rate post sale. It's something most cable operators have been routinely sued for, and regulators enjoy turning a blind eye to (despite largely being false advertising). The company, for its part, continues to insist that these price hikes simply reflect the wonderful service users are now getting from the nation's second biggest cable provider:

"The price of Spectrum Internet reflects the dramatically faster speeds and investments we’ve made in reliability and quality," Michel said. "Earlier this year, we doubled the starting download speed of Spectrum Internet from 100 to 200 megabits per second. Lastly, our receivers are still comparable or lower in price than our major competitors'."

Charter omits that many of these speed hikes only came about thanks to merger conditions, or that its speed increases lagged dramatically behind contemporaries like Comcast as it focused primarily on its last megamerger. Of course higher prices, poor service, and some of the worst ranked customer support of any company in America (no easy feet given the airline and banking industries expertise) are the net result of both the blind deregulation of natural monopolies and our adoration of blindly buying into megamerger promises, a reality that our tech policy never quite seems capable of keying in on.

This is, unfortunately for you, a problem that's only going to get worse before it gets better thanks to a lack of competition in broadband and a refusal to embrace policies that actually encourage said competition. Instead, the telecom industry (with the Trump FCC's help) has been waging a not subtle war on both federal and state consumer protections, while at the same time quietly securing a significant monopoly over faster broadband speeds. You'd think the end result of this would be obvious, but given our refusal to address this reality, you'd apparently be mistaken.

Filed Under: fees, mergers, rates, synergies
Companies: charter, charter communications

T-Mobile CEO Insists New Merger Will Create Jobs, Competition. Wall Street, History Disagree.

from the merge-ALL-the-things dept

Historically, large telecom mergers don't end well for consumers or employees. Usually in the wake of these megadeals nothing much happens for about a year, after which the acquiring company begins trimming back redundant positions and offices. In telecom, growth for growth's sake also usually has a detrimental impact on customer service, investment in which takes a back seat to getting acquired systems and employees in sync (see: Comcast). And more often than not, mindless consolidation in telecom tends to slowly reduce overall players in the space, resulting in higher prices and apathy no matter how many promises to the contrary are made by the merging companies (see: Charter, Time Warner Cable).

As T-Mobile and Sprint attempt to merge (once again), their executives are throwing out all the usual claims ahead of such mergers: that the merger will create immeasurable "synergies"; that the reduction of major U.S. wireless competitors from four to three will somehow create competition; that the deal will somehow make it easier for them to deploy next-gen "5G" networks; and that the deal will somehow magically create oodles of new jobs.

At a meeting with Sprint employees this week, T-Mobile CEO John Legere tried to ease employees' worries that many of them would be out of a job once the two carriers are fused into one. This merger, Legere told employees, would somehow be different (he failed to offer any solid reasons why):

"Synergies’ is a scary word for people,” acknowledged T-Mobile’s Legere in comments to Sprint employees during Sprint’s town hall meeting with T-Mobile’s management. “In general, in mergers and in things that are done that are just about survival, synergy usually means people losing jobs, supply going down. This is a very, very unique merger. And as Marcelo [Claure, Sprint’s former CEO] said, when you raise that little right hand and swear to tell the truth, the whole truth, and nothing but the truth, when you say we’re going to add jobs, we’re going to add jobs."

It's worth bookmarking that claim for posterity. Especially since this is the exact opposite of what most Wall Street analysts are saying. Analysts are predicting anywhere between 10,000 and 30,000 potential jobs lost (the latter being nearly as many employees as Sprint has) as the new, bigger T-Mobile sets about eliminating redundant positions, especially in retail. But Legere, undaundted, didn't just stop there, insisting that the job creation from the merger could be even more spectacular for some, unspecified reason:

"We’ve said it from day one: There will be more jobs on day one and every day thereafter than both companies. And by the way, that’s assuming that both companies are successful with the plans that they had laid out. Right? So it could be even more than what would ultimately happen,” he said.

Continued Legere: “Two is those come in different varieties, but year one, you can expect 3,000 more jobs. Right? By 2024, 11, 000 more jobs. We need at least 5,000 new Care positions. We’re going to build new retail stores. Okay? A lot of network investment in jobs. New businesses that we’re entering into that we don’t have the talent or capability from."

Legere's likely going to get a pass for this because, in stark contrast to most telecom CEOs, he's "brash" and funny. But that doesn't really change the historical precedent that, as anybody who has watched or lived through a telecom merger can attest, a sizable erosion of jobs is simply part of the equation. Again, for about a year after most deals you'll hear near-endless assurances that "nothing is going to change," until, of course, it does.

Mega Deals are usually fantastic for both shareholders and executives, in part because they quite often reduce competition, therefore increasing market power and reducing any incentive to oh, try. But megamergers are almost always harmful for consumers, yet every time one comes up the press coverage just kind of floats over that fact, with "he said, she said" reporting never really pointing out the lessons of history. That's especially true in telecom, where the downsides of a relentless, almost mindless urge to consolidate are abundantly obvious, but always play second fiddle to CEO promises that this time will be different.

The companies' previous merger attempt was blocked in 2014 after regulators noted that removing one of just four major carriers would result in a proportionally-lower incentive to actually compete on price, something that's really not debatable if you've paid attention to telecom and broadband industry history. That's especially true in Canada, where consolidation to just three players has resulted in some of the highest mobile data prices in the developed world. AT&T's attempt to acquire T-Mobile in 2011 was blocked for the same reason, a move many forget resulted in T-Mobile being more competitive than ever.

Whether this effort gets approved still isn't clear, though the Ajit Pai FCC's tendency to rubber stamp most industry desires isn't boding well for opponents of the $23 billion super-union. It's not really clear why American consumers and the press, time and time again, blindly believe promises of merger synergies like some perpetual game of Charlie Brown and Lucy playing "football." But what is clear is that this gullibility isn't something that's going away any time soon.

Filed Under: competition, jobs, john legere, merger, mobile carriers, synergies
Companies: sprint, t-mobile

Sprint, T-Mobile Execs Bullshit Congress On The Benefits Of Merger Mania

from the less-competition-means-more-competition dept

Sprint and T-Mobile last week went before Congress to literally argue that fewer competitors in the wireless space will magically result in... more competition in the wireless space. The two companies are trying to gain regulatory approval for their latest $23 billion merger attempt, the second time in four years this particular deal has been attempted.

The companies' previous merger attempt was blocked in 2014 after regulators noted that removing one of just four major carriers would result in a proportionally-lower incentive to actually compete on price, something that's really not debatable if you've paid attention to telecom and broadband industry history. That's especially true in Canada, where consolidation to just three players has resulted in some of the highest mobile data prices in the developed world. AT&T's attempt to acquire T-Mobile in 2011 was blocked for the same reason, a move that many forget resulted in T-mobile being more competitive than ever.

But while speaking before a Senate Judiciary subcommittee investigating the deal, T-Mobile and Sprint executives told Congress a decidedly different story. One in which the rules of competition, and mathematics, no longer apparently apply:

"This consolidation will lead to lower prices,” T-Mobile CEO John Legere told hearing attendees. "This is actually moving from two to three,” Legere claimed, insisting that joining forces with Sprint will make a more “viable competitor” for AT&T and Verizon.

But history has repeatedly shown in telecom that claims of competitive "synergies" never actually materialize. A major reason most ISPs are so hated is because they've spent decades prioritizing growth for growth's sake over anything else, and, more often than not, fail to scale things like customer service and support proportionally because that kind of growth erodes revenues. As a result you get an endless string of telecom mergers that, like Charter's recent acquisition of Time Warner Cable, simply result in higher prices and worse service than ever before.

Sprint and T-Mobile's central thesis in selling the merger (this time around) is that Sprint can't possibly survive without merging with T-Mobile. In fact, one of Sprint's recent filings with the FCC (pdf) comically tries to go out of its way to argue just how terrible the company currently is, in stark contrast to everything the company had been saying the last few years:

"Sprint’s standalone future will not be one that allows it to be an effective competitor to Verizon and AT&T on a nationwide basis. And though Sprint’s massive cost reductions have stabilized the company’s finances and yielded positive free cash flow for the first time in many years, the company achieved that result only by shrinking the company and reducing network investment to historically low levels."

But while Sprint does have a heavy debt load (which is not uncommon in the merger-obsessed telecom sector) and has struggled to find a real brand identity (which says more about leadership than finances), the threat of its imminent demise is being amplified for strategic effect. The company's balance sheet has been improving, with the company routinely propped up by deep-pocketed Japanese owner Softbank. Meanwhile there are numerous potential partners interested in the wireless industry that could have provided a meaningful partnership (Dish, Charter, Comcast) that wouldn't have reduced competition.

Of course claiming "fewer competitors improves competition and lowers prices" isn't the only falsehood being perpetuated by the company. They're also promising that the merger will be a boon for job creation, despite numerous Wall Street analyst estimates that the deal could eliminate up to 30,000 jobs as redundant positions (especially in retail and middle management) are inevitably eliminated.

For some reason, like Charlie Brown and his damn football, America doesn't seem to ever really learn any lessons from its love affair with mindless merger mania and our love of growth for growth's sake. These deals almost always exclusively only benefit shareholders and executives, a lesson we apparently love to ignore time and time again.

Filed Under: competition, congress, consolidation, john legere, mergers, synergies
Companies: sprint, t-mobile

Fresh Off Its Merger, AT&T Jacks Up Price Of Streaming Video Service

from the history-repeats-itself dept

It didn't take long for AT&T's promises of merger synergies to magically evaporate. During the company's sales pitch for its $86 billion acquisition of Time Warner, AT&T repeatedly stated how the merger would result in all manner of "synergies" and savings that would be passed on to the consumer. In reality, the massive debt load acquired in the wake of the deal has AT&T doing everything in its power to try and trim its M&A-bloated balance sheet... to the immediate detriment of the company's customers.

Last week we noted how AT&T had begun flexing its muscles in the wake of a Judge's comically-myopic ruling in the Time Warner case. First, AT&T raised the price of some of its "unlimited" data plans, then axed a deal that provided HBO for free to some wireless customers. Then the company set to work raising a misleading, nonsensical and unnecessary "administrative fee" from $0.76 to $1.99, effectively providing AT&T with roughly $800 million in additional revenue every year. Such garbage fees are routinely used to help broadband providers falsely advertise a lower rate.

Not to be outdone, AT&T is also now informing the company's DirecTV Now streaming video customers that they can look forward to a new $5 price hike starting in August. The hike is necessary, AT&T claims, in order to bring "the cost of this service in line with the market":

"In the 18 months since our launch, we have continued to evolve our DIRECTV NOW products to serve this new customer set and compare favorably with our competitors. To continue delivering the best possible streaming experience for both new and existing customers, we’re bringing the cost of this service in line with the market—which starts at a $40 price point."

You're to forget, apparently, that one of AT&T's core selling points during the merger approval process was that owning "must have" content like HBO was going to make it easier for AT&T to provide users cheaper, better TV service. From an AT&T brief (pdf) filed at the tail end of arguments during company's recent merger skirmish with the DOJ:

"The evidence overwhelmingly showed that this merger is likely to enhance competition substantially, because it will enable the merged company to reduce prices, offer innovative video products, and compete more effectively against the increasingly powerful, vertically integrated 'FAANG' [Facebook, Apple, Amazon, Netflix, and Google] companies."

Yeah, or, you know, not. AT&T also forgot, apparently, that the whole reason users cut the cord and head to streaming services in the first place is because they're tired of often bi-annual rate hikes on traditional TV service (Dish Network's Sling TV is also issuing a $5 price hike to its own Sling TV service in perfect symmetry).

Again, none of this is new. Time and time again, Americans are promised a world of synergies and savings that can only be provided if already-massive companies are allowed to grow even larger without much oversight. And time and time again, we quickly learn that the lion's share of those promises are horse shit. We then fail utterly to actually learn anything from the experience. Meanwhile, with net neutrality on the chopping block, you can be damn sure that sneaky fees and vanilla price hikes are going to be the least of our problems in the face of a reconstituted Ma Bell.

Filed Under: directv, prices, streaming video, synergies
Companies: at&t, directv

AT&T, DirecTV Deliver 'Merger Synergies' By Raising Rates In Perfect Unison

from the synergistic-efficiencies dept

You'll recall that when AT&T was trying to justify its $69 billion acquisition of DirecTV, it rolled out all the usual claims about how the deal would have immeasurable benefits for consumers. Sure, the deal would technically eliminate jobs and a pay TV competitor from an already competitively-stunted market, but just think of the potential synergies! And as the two companies begin to fuse operationally, these amazing synergies have started to materialize -- in the form of new rate hikes imposed by both companies on exactly the same day.

Claiming the hikes are due to an "improved experience" for consumers, AT&T has notified its U-Verse TV subscribers that they can expect $2-$4 price hikes on all the company's TV packages, $2 price hikes on the company's voice services, as well as a notable bump in most of the company's sneaky, below-the-line fees -- used to jack up the advertised cost of service post-sale. That includes a bump in AT&T's "Regulatory Video Cost Recovery Charge" (which isn't government mandated and is entirely misleading) and its "Broadcast TV Surcharge" (which is just part of the overall cost of programming buried below the line).

DirecTV is simultaneously informing all customers of their own rate hikes on January 28, including a $2 to $8 bump in most TV packages. Users also get to enjoy a bump in DirecTV's monthly "TV fee," amusingly explained as such on the AT&T website:

"As technology becomes more advanced, monthly fees for receivers and Genie Minis allow us to provide the latest equipment with minimal upfront cost to the customer. The upgrade fees allow us to keep our monthly fees low. Many leased items require an upfront payment as well as monthly fees. Similar to leasing a car, a customer pays an amount upfront, and that amount allows the customer and the company to keep the monthly fee low."

Yeah, that's a company increasing a fee it claims exists to protect consumers from higher fees.

Note, of course, that AT&T repeatedly stated pre-merger how the merger with DirecTV would give them greater leverage with broadcasters than ever before, allowing them to negotiate lower rates for programming. Unmentioned, of course, was that those dramatic price reductions would be pocketed and not passed on to consumers. Amusingly, the only place the two companies are lowering rates is the cost of HBO, which they've had to drop from $19 to $15 thanks entirely to competition from HBO's standalone streaming video service, HBO Now. Hopefully there's more price disruption from where that came from.

AT&T was fortunate in that consumer ire toward Comcast's own bad deal allowed the AT&T DirecTV deal to fly under the radar. And since the FCC saw fit to approve the deal with largely meaningless conditions, the mega-merger (which the FCC claims somehow served the public interest) doesn't appear to provide any real benefits to consumers at all. And to think, we haven't even gotten to the point where AT&T begins to fire tens of thousands of employees to synergistically improve operational efficiencies!

Filed Under: broadband, cable, merger, price hikes, synergies, tv
Companies: at&t, directv

eBay Finally Realizes That No One Is Interested In Voice Communication With Others During An Online Auction

from the about-time dept

When eBay first bought Skype we were among the many, many, many people left scratching their heads wondering where the supposed "synergies" were. We were told two things. First, that Skype had many users in China who would now suddenly start using eBay for auctions. Why? No one knows. In reality it had almost no effect. Just because you make calls via a software program it doesn't make you any more interested in doing online auctions through its parent company, apparently. Second, it would now allow buyers and sellers to communicate by voice. But why would they want to? Sure, maybe in a very rare case it might be helpful, but one of the advantages of an online auction system like eBay is that you don't need to actually talk to the other party. And if it was that important to talk, the buyer and seller could just agree to use Skype on their own without eBay spending billions. And, in fact, studies showed that this "feature" wasn't wanted by most eBay users.

But, still, in an effort to show that there really (no, really, really!) were some synergies, eBay integrated Skype into online auctions. Of course, now that eBay has finally admitted that there really were no synergies, taken a huge writedown on the investment and is looking to spin off Skype, the company is finally removing the integrated Skype buttons on auctions, and are even admitting that the company is involved "in an effort to remove features with limited buyer and seller usage." Was it really that hard to recognize how little synergies there were before spending multiple billions of dollars?

Filed Under: auction, synergies, voice
Companies: ebay, skype

Synergies? Fox News Skips Fox's Own Social Network For Facebook

from the synergies-don't-mean-much dept

While we do believe that there can be so-called "synergies" in various mergers and acquisitions, it often does seem as though companies over state what those benefits may be. Take, for example, the news that TV channel Fox News has set up shop on Facebook, rather than the social network's main competitor, MySpace. MySpace just so happens to be owned by Fox -- so it may seem odd that Fox News chose to go with Facebook rather than sister company MySpace. Basically, it appears that Fox News recognized that it was more likely to find an audience on Facebook than MySpace. This highlights just how silly some expected "synergies" often turn out to be. While many may have expected that the close relationship between Fox News and MySpace would mean that there's some advantage to both organizations to work together, the truth was the opposite. If Fox News had gone with MySpace instead, due to "synergies," (i.e., management mandates that those two companies work together) the end effect would have been worse. Fox News would have gone with the social network that didn't fit as well -- just to please management. So, rather than a "benefit" the so-called synergy would have been a net negative. In other words, the so-called "synergies" wouldn't actually have been... well... synergistic. The end result shows why so many mergers over so-called "synergies" don't really make much sense. If there's true synergy between the separate organizations, then they can work together as partners, rather than from within the same company. Otherwise, you get a situation where you may be locked in to a partner who is not as good as one outside your organization. (Post updated to clarify).

Filed Under: social networks, synergies
Companies: facebook, fox, fox news, myspace