Ina Fried

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Sprint CEO Dan Hesse Talks Green, Recycles Arguments Against ATT/T-Mobile Deal

Sprint CEO Dan Hesse on Friday lashed out again at AT&T’s plan to buy T-Mobile USA, saying the deal will not only hurt competition and lead to higher prices, but will also stifle innovation.

If the deal is allowed, “competition will be stifled, growth will be stifled and wireless innovation will be jeopardized,” Hesse said, speaking at the Commonwealth Club in San Francisco. “We just can’t let this happen.”

He also talked about the importance of being open, saying that competitors favor closed approaches with walled gardens and exclusive app stores–a clear reference to the iPhone. If the deal is allowed, Sprint would be the only major carrier not selling Apple’s device.

Sprint has been the most vocal opponent of the proposed $39 billion deal, vowing to fight against the transaction as it moves through the regulatory approval process. Both the Federal Communications Commission and Department of Justice must sign off on the deal.

Hesse pledged to get to the topic at hand–environmental issues–but said he felt compelled to start his talk with a warning. Once he had finished making sure everyone was clear where he stood on the T-Mobile deal, he shifted the talk to Sprint’s eco efforts, including both environmentally friendly devices and workplace policies, such as allowing workers to telecommute and reducing corporate energy use.

In conjunction with Hesse’s talk, Sprint announced the Samsung Replenish–it’s first “green” Android phone.

“We’ve decided we need to do even more to make green even more compelling for our customers,” Hesse said.

To make the phone more compelling, Hesse said the company is offering the Replenish with a monthly service plan that is $10 lower than those available for all its other phones.

“The phone basically pays for itself in five months,” Hesse said.

Hesse also talked about the potential environmental benefits of having so-called machine-to-machine wireless connections that allow for more efficient power generation, among other things.

In some cases, Hesse said the company has had to take risks, noting that market research showed that the green-ness of a phone wasn’t a top consideration among phone buyers. Indeed, while the first products were in the planning process, some folks wanted to kill them, but Hesse said he insisted on bringing the devices to market.

Hesse said that the eco-friendly devices are still just a small percentage of the phones that Sprint sells–in part because some popular features, such as the newest biggest screens, aren’t available in a “green” way.

“They are not in the sales category of the Evo 4g,” Hesse said. “It’s still profitable for us to offer the devices.”

In perhaps his most controversial statement, Hesse said that there would be some benefit if energy costs were higher, noting that people might focus more on conservation.

“I do think energy is cheaper than it should be,” Hesse said.

In a light-hearted moment, Hesse was briefly interrupted as a phone in the audience rang loudly.

“I think somebody has Sprint because you are getting a signal,” he quipped.

Hesse ended his prepared remarks where he started, arguing that the T-Mobile deal would shift the industry from competition into duopoly.

“I believe wireless innovation is at risk,” Hesse said. “I hope you will not sit silent but you will also let your important voice be heard.”

The question and answer session began with the moderator putting Hesse on the hot seat, noting that Sprint was itself talking with T-Mobile about a deal.

“That’s been reported,” Hesse said. “We’ve never acknowledged or denied.”

Why, though, would that merger be OK, the moderator pressed.

“Theoretically, if Sprint and T-Mobile were talking, they are much, much smaller companies than either AT&T or Verizon,” Hesse said, adding that even if Sprint and T-Mobile had merged, they still would have been the number three player.

Hesse was asked by an audience member just what Sprint will do if AT&T is allowed to buy T-Mobile.

“That’s something I don’t want to contemplate, actually,” Hesse said. “We’ll continue to compete as well as we can.

One of the big impacts, Hesse said, is that it could be even harder for Sprint to get the latest hot devices. His rivals, he said, can get exclusivity by promising to take a huge number of devices, in some cases a cellphone maker’s entire production capacity of a given product.

“That’s how an exclusive comes into being,” Hesse said. “”Exclusive devices are really a function of market power.”

Update: AT&T has fired back, calling Hesse’s remarks “way off base” and positioned them as at odds with statements he made before the merger was announced.

“As recently as last October, Mr. Hesse said the wireless industry is ‘hyper competitive’,” AT&T said in a blog post. “The month prior, his CFO talked about how ‘tough’ retail competition is in the wireless market, citing at least six major competitors. In February of last year, Mr. Hesse said, ‘M&A is absolutely a way to get the growth in the industry, if a particular transaction makes sense for anybody.’ “

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work