ATandT, T-Mobile Deal Will Face FCC, Rival Pressure

 
 
By Nicholas Kolakowski  |  Posted 2011-03-21 Email Print this article Print
 
 
 
 
 
 
 

AT&T's $39 billion acquisition of T-Mobile will face massive government scrutiny and big counter-moves from rivals, according to analysts.

Within a day of AT&T's announcement that it will acquire T-Mobile for $39 billion in cash and stock, the carrier moved pre-emptively to position the deal as good for competition and the United States' telecommunications network. Should the acquisition meet approval, it would make AT&T by far the largest carrier in the United States.

In an early-morning phone call with investors and analysts, AT&T executives did their best to steamroll any possible objections to the deal's regulatory approval. In coming weeks and months, the Federal Communications Commission and the U.S. Department of Justice will both examine whether the acquisition violates antitrust regulations, and possibly ask the carrier for concessions such as price caps.  

"This transaction delivers significant customer, shareowner and public benefits that are available at this level only from the combination of these two companies," Randall Stephenson, AT&T's chairman and CEO, wrote in a March 20 statement. "With additional spectrum and network capabilities, we can better meet our customers' current demands, build for the future and help achieve the President's goals for a high-speed, wirelessly connected America."

Stephenson and other executives reiterated those points in more detail during the March 21 call, and argued that a variety of large and small rivals-not only Verizon and Sprint, but also MetroPCS and Leap Wireless-will keep things fiercely competitive.

"Wireless competition will continue to flourish," read a slide from the PowerPoint deck accompanying the call.

With an eye toward regulators, AT&T is also arguing that the transaction "is in public interest," helping ease impending spectrum shortages, expanding LTE to more of the American population, and improving the quality of voice and data service. The combined AT&T and T-Mobile will save costs via merging back-end processes and closing a selection of retail stores. 

But AT&T's rivals are already making noise about the deal. 

"A combined AT&T and T-Mobile would be almost three times the size of Sprint, the third largest wireless competitor," read a March 20 statement from Sprint, as reprinted on AllThingsD. "If approved, the merger would result in a wireless industry dominated overwhelmingly by two vertically integrated companies that control almost 80 percent of the U.S. wireless post-paid market."

Some early analysts felt that AT&T has a long road ahead in getting regulatory approval.

"So far as regulatory oversight of AT&T/T-Mobile goes, I expect the FCC will be particularly careful," Charles King, principal analyst of Pund-IT, wrote in a March 21 e-mail to eWEEK. "Not only does the deal effectively consolidate a huge part of the U.S. wireless market in the hands of a single vendor but AT&T's wireless plan offerings and costs differ significantly from T-Mobile's."

Politics could also play a role. "The FCC under President Obama has been considerably more vigilant than it was during previous administrations," King added. "AT&T may be gambling that the anti-regulatory mood which pervades the GOP and the contentious run up to the 2012 elections will create enough turbulence to let the deal proceed."

Others also took issue with AT&T's assertion that the acquisition will prove beneficial for consumers.

"The move takes out a key pricing competitor to AT&T, gives access to some key 4G technologies from T-Mobile, and clearly solidified AT&T in the lead to the U.S. market," Ray Wang, principal analyst for Constellation Research, wrote in a March 21 e-mail to eWEEK. "The bottom line: AT&T wins, customers lose."

Given AT&T's potential gains, Wang continued, its carrier rivals will likely try everything they can to make government approval difficult. "Verizon and Sprint will make sure of it."


 
 
 
 
Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.
 
 
 
 
 
 
 

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