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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

July 31, 2014 at 10:37 AM

T-Mobile: Dropped call for Eastside

Whomever wins the bidding for T-Mobile US, one outcome seems certain: The wireless carrier’s headquarters in Bellevue will be lost.

France’s Iliad said today it would offer $15 billion in cash for a 56.6 share of T-Mobile. This will compete against Sprint, which has been honing a complete acquisition of the company for several months said to be valued at $32 billion. According to the The Wall Street Journal, details of the French bid are still unclear.

If Sprint succeeds, the entire headquarters on the Eastside is a goner. Sprint, whose name traces back to its ownership by the Southern Pacific Railroad on whose rights-of-way cable, microwave and fiber optic were laid, is based in the suburbs of Kansas City, Kan. One way these deals “pencil out” is eliminating the suddenly redundant headquarters of the acquired company.

If Iliad wins, the outcome is a bit murkier. T-Mobile has been based here with 67 percent of its stock owned by Deutsche Telekom. But Iliad is a different operator, a newcomer known, according to the Journal, for its “cutthroat rates.” While acquiring a T-Mobile stake would give it an opening in the lucrative American cell market, it’s unlikely that it would maintain the staff or autonomy here that was characteristic of Deutsche Telekom (and even then, there were plenty of layoffs). Details of the offer will be important, too. If, as reported, the “cash offer” involves debt financing, this could be a burden to the new entity.

The Germans wanted out of the U.S. market after years of T-Mobile disappointments. But when the government blocked a sale to AT&T in 2012, T-Mobile began a remarkable turnaround under a new chief executive, John Legere. James B. Stewart of the New York Times wrote:

Legere not only looked but also acted the part of the “disruptive” competitor beloved by antitrust regulators but all too rare in most concentrated industries… He branded T-Mobile the “Un-carrier” and took square aim at the staid giants of the industry, AT&T and Verizon, publicly describing them with language that can’t be printed in this newspaper.

This was also a boon to the Seattle region because we retained a major headquarters, and the high-wage jobs, talent, capital formation and potential for creative spinoffs that brings. A T-Mobile spokeswoman said this morning that the company has about 4,000 employees on the Eastside, but declined to give specifics about the headquarters head count. But with T-Mobile as the fourth-largest wireless carrier in the country, this is a major corporate center for the region.

But Cinderella stories rarely have a happy ending in what passes for capitalism in America today. The pressures of the capital markets to create highly concentrated industries keep increasing. Such are the consequences of lax antitrust enforcement over the past 30-plus years. The cartels in airlines, media, cable and home Internet providers, etc. etc. say they need size to “serve consumers” and “compete in global markets.” But the results also kill jobs and competition, damage communities, and there’s plenty of evidence this hurts innovation and exacerbates inequality. It also gives the cartels enormous political power.

To be sure, T-Mobile did its own acquiring, with Dallas-based MetroPCS. But that was relatively small-time, and some M&A is natural and health — provided too much concentration doesn’t result.

For Wall Street, a cartel of four big wireless carries is one too many. Unless the Obama Justice Department once again finds its rarely found backbone, T-Mobile will be all or mostly gone from here. Along with the Amgen closing and layoffs at Microsoft, this will be another test of the Seattle boom. If we lose a headquarters, it will be the toughest blow yet.

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