AT&T and T-Mobile Withdraw Merger Application After FCC Report Undermines Deal
The 109-page report concludes that merging the nation’s second- and fourth-largest mobile carriers would cause significant job losses and that AT&T would probably be able to build high-speed wireless Internet connections without the merger. The FCC’s conclusion undermines AT&T’s claims about the deal’s benefits.
The FCC let AT&T withdraw its application to buy T-Mobile. The Justice Department sued in August to block the merger as anti-competitive, and a court hearing is scheduled for February 2012. The FCC moved last week to send the deal for a hearing that may take much of next year, an outcome avoided by AT&T’s withdrawing the application.
“The applicants have failed to meet their burden of demonstrating that the competitive harms that would result from the proposed transaction are outweighed by the claimed benefits,” reads the FCC’s report. T-Mobile is both innovative and offers prices lower than that of its competitors, making its potential loss as a competitive force “a cause for serious concern,” the FCC found.
Allowing AT&T to withdraw its application leaves open the possibility that AT&T could again approach the commission with a revised deal. Before the report, regulators said AT&T might give up half of T-Mobile’s customers to convince regulators to approve the deal.
The FCC’s decision to make its report public is “troubling” to Jim Cicconi, AT&T’s senior executive vice president-external and legislative affairs. “We have had no opportunity to address or rebut its claims, which makes its release all the more improper,” he said in an e-mailed statement.
Meanwhile, Sprint Nextel (NYSE:S) has applauded the FCC’s action. “The investigation’s findings are clear: approval of AT&T’s bid for T-Mobile would lead to higher prices for consumers, eliminate jobs, harm competition, and damp innovation across the wireless industry,” said Vonya McCann, Sprint senior vice president for government affairs.
The FCC’s review of the merger “has had a clear focus: fostering a competitive market that drives innovation, promotes investment, encourages job creation, and protects consumers,” FCC Chairman Julius Genachowski.
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AT&T and T-Mobile parent Deutsche Telekom announced their decision to withdraw their FCC merger applications last week after Genachowski asked fellow commissioners to send the deal to the hearing before an agency judge. AT&T said the companies plan to focus on objections from anti-trust authorities and return to the FCC with a revised proposal at some point in the future.