The abysmal August jobs report released on Friday -- zero-job growth and unemployment rate frozen at 9.1 percent -- provides a gloomy backdrop to the battle being waged between the Justice Department (DoJ) and AT &T (NYSE: T) with respect to the telecom giant’s proposed merger with T-Mobile.
The DoJ opposes the $39-billion deal, largely on anti-trust grounds, but also cited that such a transaction would cost thousands of jobs -- in an economy that simply cannot withstand anymore job losses.
James M. Cole, the deputy attorney general, said at a news conference that mergers usually lead to job cuts and “so we see this [lawsuit] as a move that will help protect jobs in the economy, not a move that is going in any way to reduce them.”
However, other parties claim that the government is mistaken and that this merger will create jobs, not eliminate them.
The union representing AT&T’s wireless workers, the Communications Workers of America (CWA), not only endorsed the merger, but has also criticized the DoJ for blocking it.
On her blog, Debbie Goldman, CWA’s Telecommunications Policy Director, wrote: “[Critics have] manufactured a fact, claiming that the AT&T/T-Mobile merger will lead to 20,000 lay-offs of T-Mobile workers. And they are repeating it again and again. Certainly, with unemployment hovering at a stubborn nine percent, the impact of the proposed merger on jobs today and in the future should be a top concern of policymakers.”
Goldman added: “The critics are just [plain] wrong. The proposed AT&T/T-Mobile merger is good for workers and good for job creation.”
She sought to refute some of the assertions made by critics of the proposed merger.
One contention is that AT&T has eliminated 100,000 jobs over the past ten years. Goldman counters that those job cuts came from the company’s wireline business that has suffered deep declines in its customer base as more people switched to mobile phones.
“CWA is not defending job cuts at AT&T, but at least get your facts straight,” Goldman wrote. “On the wireless side of AT&T, there has been very little drop in employment, despite multiple mergers. In 2002, there were 67,000 employees at AT&T Mobility and its predecessor companies. Today, there are 70,000 employees at AT&T Mobility. Certainly not evidence to point to massive wireless job cuts at AT&T.”
She also rejects the notion that mergers always pave the way toward job losses.
“CWA will both negotiate and enforce agreements with AT&T to ensure that no AT&T Mobility or T-Mobile occupational workers will lose their jobs,” she wrote.
“The simple fact is that in CWA’s long experience in working with AT&T on mergers and acquisitions, not one CWA-represented employee has ever lost their job due to that fact.”
Goldman also said that T-Mobile needs to merge with AT&T for its own survival -- and that Sprint Nextel (NYSE: S) would have been a bad partner.
“There is no future for an independent T-Mobile,” she wrote.
“T-Mobile is losing customers, with declining revenues and profits, and its parent company put it up for sale. There were two bidders: AT&T and Sprint. Sprint outsources and offshores much of its customer service work and network management. It is notorious for its violation of workers’ rights. In contrast, AT&T is a financially strong company, as the only union wireless company respects workers’ rights, and has a contractual obligation with CWA to eliminate outsourced work before laying off employees.”
In addition, Goldman noted AT&T plans to invest an additional $8 billion – above its typical $6-9 billion annual wireless capital expenditure – to build-out high-speed broadband -- a measure that The Economic Policy Institute estimates this will create 96,000 jobs.
“Critics dismiss this important merger-related benefit, claiming that stand-alone T-Mobile would have invested $8 billion,” Goldman added.
“But T-Mobile’s parent Deutsche Telekom announced in January of this year that it would stop funding T-Mobile network investment. An independent T-Mobile would not put the job-creating capital into infrastructure that AT&T plans. Moreover, AT&T’s planned near-universal high-speed wireless broadband deployment will spur the growth of Internet-related jobs throughout America, closing the digital divide, and providing a needed lifeline to rural America.”
Similarly, the Internet Innovation Alliance (IIA), a group that promotes broadband access, was also highly critical of the DoJ’s lawsuit to block the merger, citing among other things that AT&T has already committed to creating 5,000 new call-center jobs (which are currently outsourced) following the merger with T-Mobile.
“The [DoJ’s] decision… is contrary to this [Obama] Administration’s commitments to grow the economy, create jobs and expand broadband deployment,” said IIA Senior Adviser Broderick Johnson.
“Next week, President Obama is expected to unveil a wide ranging pro-jobs plan. Approval of this merger is consistent with that critical message.”
Honorary Chairman Rick Boucher commented that the IIA is “supportive of the merger because it will be helpful to our economy and U.S. job creation. Bringing jobs back to America and investing in broadband technology which will foster innovation – are a win-win for the U.S. economy.”
IIA Co-Chairman Bruce Mehlman spoke of the broader picture concerning broadband expansion and economic growth.
“Bringing call center jobs to American workers is commendable, but it’s the tip of the iceberg,” he said.
“The real job-generating benefits of the merger will be seen as higher-speed mobile broadband gets deployed to millions more Americans, giving them far greater opportunities to reach new customers, serve new markets and benefit from new applications and services that are transforming the global economy.”
The Internet Innovation Alliance further noted that, according to a study from the consulting firm Deloitte, wireless carriers may invest up to $53 billion to build out their 4G network through 2016, potentially creating up to 771,000 jobs and GDP growth of $73 billion to $151 billion.