FCC chief seeks added review of AT&T/T-Mobile deal

Tue Nov 22, 2011 7:54pm EST

A view shows the AT&T store sign in Broomfield, Colorado April 20, 2011. REUTERS/Rick Wilking

A view shows the AT&T store sign in Broomfield, Colorado April 20, 2011.

Credit: Reuters/Rick Wilking

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(Reuters) - AT&T Inc was dealt a blow on Tuesday as the top U.S. communications regulator sought to have its planned $39 billion purchase of T-Mobile USA sent to an administrative law judge for review.

Federal Communications Commission Chairman Julius Genachowski sent a draft order to his fellow commissioners, citing FCC staff findings that the deal would significantly diminish competition and lead to massive job losses.

"The record clearly shows that -- in no uncertain terms -- this merger would result in a massive loss of U.S. jobs and investment," a senior FCC official said.

The agency also concluded that the merger would not result in significantly more buildout of next generation 4G wireless service than would occur absent the transaction.

AT&T argues the deal will accelerate its expansion of high-speed wireless service to nearly all Americans.

The U.S. Justice Department went to court in August to oppose AT&T's purchase of T-Mobile from Deutsche Telekom AG on antitrust grounds. A trial in that case is due to begin on February 13.

Any administrative hearing at the FCC, which is charged with evaluating the public interest merits of the deal, would begin after the antitrust trial, an FCC official said.

AT&T called the FCC action "disappointing" and disputed the agency's conclusion that its T-Mobile deal, with $8 billion in broadband investment and commitments on job preservation and enhancement, would result in the loss of jobs and investment.

The FCC recently said its $4.5 billion annual fund to promote broadband to underserved communities would create 500,00 jobs over the next six years.

"This notion, that when government spends money on broadband it creates jobs, but when a private company spends money it doesn't, is clearly wrong on its face," said Jim Cicconi, AT&T's top executive for external and legislative affairs.

ADDING LENGTH TO REVIEW

Mizuho analyst Michael Nelson said the move adds another hurdle to AT&T's prospects for closing the deal. "It's like the FCC is piling on to the DOJ's blocking of the deal," he said.

Analysts at Stifel Nicolaus added that "such an extended FCC review could put added pressure on T-Mobile to seek to exit the merger."

AT&T had hoped to close the deal by the first quarter of 2012.

Genachowski's order still requires approval by a majority of commissioners but an administrative hearing seems likely unless the antitrust case results in a permanent injunction against the transaction, making the FCC hearing irrelevant.

Genachowski is expected to get the support of his two fellow Democrats on the panel. The agency was left with only one Republican after Meredith Attwell Baker's departure in May.

Acquiring T-Mobile would vault No. 2 ranked AT&T into the leading position in the U.S. wireless market. The current industry leader is Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc.

Sprint Nextel Corp, the No. 3 U.S. carrier, and a regional competitor, C Spire, have also filed a lawsuit to stop AT&T's purchase of T-Mobile, the No. 4 U.S. operator.

The 2002 proposed merger of EchoStar and DirecTV was the last time the FCC sought an administrative hearing on a merger deal. In that case, the companies ultimately scrapped their deal.

Genachowski circulated a separate order on Tuesday to allow with conditions AT&T's proposed $1.9 billion purchase of spectrum from Qualcomm Inc, an FCC official said. The agency had no comment on any details of those conditions.

Qualcomm offered its unused spectrum after its FLO TV business, a mobile television service, failed to take off.

(Reporting by Jasmin Melvin in Washington D.C.; Editing by Tim Dobbyn)

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Comments (1)
raymondpoppy wrote:
Consumers are finally noticing that AT&T and Verizon = The Most Expensive Wireless Plans in America. We know where Verizon and AT&T (both in the top 5 for corporate lobbying) get all that money to run commercials 24×7, pay out huge “fat cat” executive bonuses and hire armies of lawyers and lobbyists to push the U.S. market into a wireless industry duopoly — the American consumer. This is how AT&T and Verizon fashion themselves as brilliant … with their political use of money.

Taking into account the whole U.S. market, a combination of AT&T and T-Mobile would increase the Herfindahl-Hirschman Index (HHI), a widely accepted measure of market concentration, to 3,216 from 2,848, according to a Bloomberg analysis. Any score above 2,500 indicates a highly concentrated market, and any increase of more than 200 points clearly enhances market power, according to federal guidelines.

If this ridiculous deal goes through, Sprint will be the only low-priced post-paid national wireless carrier left in the United States. T-Mobile customers are already fleeing to Sprint because they know they won’t get low prices from AT&T or Verizon. But AT&T and Verizon are two of the top corporate lobbyists in the country, so beware of how things could “mysteriously” turn in this case.

“It’s only a slight overstatement to say that if they weren’t going to block this one, the Justice Department might as well just throw the antitrust guidelines out the window,” said Herbert Hovenkamp, professor of law at the University of Iowa, who is considered by many to be the dean of American antitrust law. “This merger clearly seems to violate them.”

Nov 22, 2011 7:34pm EST  --  Report as abuse
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