Commentary

Can Weak Customer Ratings Help AT&T With Merger?

ATnT-T-Mobile

New ratings released today show smaller, prepaid services like Leap Wireless, TracFone and U.S. Cellular scored highest among wireless carriers in customer satisfaction. These companies earned an aggregate score of 77 on a 100-point scale, according to a survey by American Customer Satisfaction Index (ACSI), created by the University of Michigan's Ross School of Business.

Among the four U.S. major carriers, Sprint and Verizon Wireless were tops, each with a score of 72. Trailing further back were proposed merger partners AT&T and T-Mobile, with scores of 66 and 70, respectively. In contrast to Sprint -- which improved its score from 70 last year and 63 in 2009 -- the scores for AT&T and T-Mobile were both down about 4% from a year ago, and matched or marked five-year lows for each.

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The ACSI report noted that it's more typical to see a drop in customer satisfaction after the report, not before. "But this is the case for AT&T and T-Mobile, whose proposed merger should be completed in about a year, pending what is expected to be a long regulatory process. Both companies show a large deterioration in customer satisfaction and in customer service," according to the study.

That suggests the customer satisfaction rating could continue to fall farther for the companies post-merger. But could AT&T somehow use the findings to help support its case for the $39 billion acquisition of T-Mobile? A key part of AT&T's argument has been that the deal won't diminish thriving competition in the wireless industry.

In merger documents filed with the FCC last month, the nation's No. 2 carrier cited vigorous competition from budget-oriented "mavericks" like Leap and MetroPCS, and especially from Sprint, which vehemently opposes the merger. It noted Sprint's aggressive pricing, new devices and next-generation network have fueled its "resurgence as a successful competitor to AT&T."

The ACSI findings would give AT&T a fresh opportunity to heap praise on rivals, whose superior customer service it might argue has helped keep them in the game against larger competitors. That advantage would presumably remain after the merger, or be magnified by worsening service by the combined AT&T-T-Mobile entity. Adopting AT&T's counterintuitive logic, that scenario would point to healthy competition, which in turn would help get the deal cleared.

Unless AT&T is just flattering to deceive. Improving its own service quality is another key rationale for the acquisition, through which AT&T would gain T-Mobile's spectrum, increased cell tower density and wider network capacity. That could lead to fewer dropped calls and higher customer satisfaction, right? But the harder AT&T pushes that argument, the less credible appears its praise of Sprint and other carriers as competitors. Whether either argument will satisfy the FCC remains to be seen.

1 comment about "Can Weak Customer Ratings Help AT&T With Merger? ".
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  1. Sean Jepheries from POSA, May 20, 2011 at 9:21 a.m.

    It's shocking how a company like tracfone, who sell ridiculously cheap handsets to retirees, and kids, don't charge the earth and the moon for service plans, can out score the big guns of wireless world.
    It is also quite warming that a company can turn things around, like Sprint has done. Same with tracfone, who had a bad reputation for having shocking customer service. Maybe AT&T can do the same - they'll have to.

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