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T-Mobile acquisition by AT&T: FCC weighs in

Today, Federal Communications Commission (FCC) Chairman Julius Genachowski began to circulate a draft order to the other four FCC Commissioners recommending that the FCC refer AT&T’s $39 billion deal to acquire T-Mobile to an administrative law judge.

Hooray! :-)

The U.S. Department of Justice has already filed a suit in federal court to block the proposed takeover.

Although the details of Genachowski’s assessment of the merger have not been made public, officials told reporters on a conference call that a merger between AT&T and T-Mobile would harm competition in 99 of the top 100 markets in the U.S., as determined using the Herfindahl-Hirschman Index to assess market concentration. The only market in which the two carriers do not exceed concentration limits is in Omaha, NE, where T-Mobile does not operate a network!

AT&T’s response:

“The FCC’s action today is disappointing,” Larry Solomon, senior vice president of corporate communications at AT&T, said in a statement. “It is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the US economy desperately needs both.”

However, FCC officials said that the public record does not support AT&T’s assertion that the merger will widen 4G LTE deployment, nor does it support the assertion that thousands of new jobs will be created. To the contrary, analysis by the FCC shows that there could be massive job loss as the result of the merger.

Mergers OFTEN result in job losses, with the elimination of redundant positions.

If the FCC commissioners approve, the administrative hearing is not expected to start until AFTER the Department of Justice’s trial against AT&T to block the merger. The trial is expected to start in February.

It is very rare for the FCC to seek an administrative hearing on merger deals like this one – the last example was the proposed merger between EchoStar and DirecTV in 2002, a deal that was eventually abandoned by the companies.

Maggie Reardon of CNET News presents a detailed “what if” look at possible courses the lawsuit, hearing, and negotiations might take.

As for me, with all of the negative news lately, I am happy to see a positive move in the public interest by the FCC. It seems so rare, anymore, when parts of the federal government function in the public interest! :-)

So far, AT&T has remained resolute that it will accomplish the merger. My past high-tech professional experience with an AT&T precursor suggests that the “reality distortion field” in parts of AT&T is quite strong, indeed. :-)

(Note added November 24, 2011: Maybe reality is setting in. AT&T said today that it will take a $4 billion accounting charge this quarter. The charge will cover PART of the break-up fee it will owe, if it fails to obtain regulatory approval to acquire T-Mobile. Happy Thanksgiving!)

(Note added November 25, 2011: Some companies [and some small children] are SO used to getting their own way that they cannot deal with the thought that they might NOT!

According to Bloomberg, the telecom giant is preparing to offer a deal to the Department of Justice under which AT&T would divest as much as 40 percent of T-Mobile’s assets as part of the acquisition.

“Just say NO” to AT&T!)

(Note added November 29, 2011: The FCC has released a 109-page report on the proposed merger in which:

‘… the regulator states that AT&T’s $39 billion acquisition of T-Mobile would not be in the public’s interest, because the merger would “substantially lessen competition,” limit consumers’ choice in wireless providers and raise prices for mobile customers.’

The report also found that AT&T was saying one thing publicly but telling a different story internally around its claims that the deal would create jobs and is necessary for AT&T to deploy next-generation wireless technology.

In the document, the FCC said its staff “identifie[d] internal AT&T documents and consistent historical practices that contradict AT&T’s claim that merging with T-Mobile is essential for AT&T to build out its LTE network to 97% of Americans.”)

-Bill at

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