Senator Kohl says AT&T deal should be blocked

WASHINGTON Wed Jul 20, 2011 5:28pm EDT

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WASHINGTON (Reuters) - Senator Herb Kohl, chairman of the U.S. Senate's antitrust subcommittee, urged the federal government to block AT&T's $39 billion plan to buy T-Mobile USA, a unit of Deutsche Telekom.

In a letter to the Justice Department and Federal Communications Commission, Kohl said that the deal "would likely cause substantial harm to competition and consumers, would be contrary to antitrust law and not in the public interest, and therefore should be blocked by your agencies."

Separately, three other lawmakers, Representatives Edward Markey, John Conyers and Anna Eshoo, also expressed concern about the deal on Wednesday, saying in a letter that they were worried about growing concentration in the wireless market.

In June, 76 lawmakers sent a letter to the Justice Department and FCC urging approval of the deal, citing AT&T's promises to improve access to poor and rural Americans.

The lawmakers have no direct role in reviewing the merger that was proposed in March, but Congress, through oversight of the regulators and by holding hearings on such deals, can influence the climate of public opinion.

Kohl's letter said the transaction would eliminate low-price competitor T-Mobile from the market.

If approved, the deal would vault No. 2 U.S. mobile service AT&T well ahead of current market leader Verizon Wireless and put nearly 80 percent of the wireless market in the hands of just two companies. Third placed Sprint Nextel has urged U.S. regulators to reject the deal.

Verizon Wireless is a venture of Verizon Communications and Vodafone Group Plc.

In his letter to Attorney General Eric Holder and FCC Chairman Julius Genachowski, Kohl said AT&T and T-Mobile are head-to-head competitors and the deal would leave just three nationwide wireless carriers.

Kohl argued that the market should be evaluated on a national basis, rather than by local markets as antitrust regulators often do in telecommunications deals.

Kohl also argued that there were no effective remedies that the companies could offer regulators that would allow them to fix the deal, saying that any proposed fix would "involve extensive regulatory supervision and interference with the complex on-going business operations of AT&T."

Kohl is head of the Senate Judiciary Committee's antitrust subcommittee, which oversees the Justice Department's antitrust division.

AT&T said that it continued to believe the deal would be approved.

"We respect Senator Kohl," said an AT&T spokesman in an emailed statement. "However, we feel his view is inconsistent with antitrust law, is shared by few others, and ignores the many positive benefits and numerous supporters of the transaction."

The three representatives said in their letter that approval of the deal would be a backward step from nearly two decades of promoting competition by accepting a duopoly in the wireless marketplace.

"Such industry consolidation could reduce competition and increase consumer costs at a time our country can least afford it," they said in their letter to Holder and Genachowski. (Reporting by Diane Bartz; Editing by Phil Berlowitz and Tim Dobbyn)

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