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Posted at 11:14 AM ET, 04/12/2011

AT&T, T-Mobile file merger application; Q&A with James Cicconi

Now that the initial surprise of AT&T’s proposed $39 billion acquisition of T-Mobile has settled, the long regulatory process of reviewing the merger is about to begin.

Last Friday, AT&T filed its application for an antitrust review at the Justice Department. The company said it aims for April 21 to file its applications for a public interest regulatory review at the Federal Communications Commission. Experts say the reviews could take one year to 18 months.

The merger, described by a source familiar with the thinking of Justice Department officials, appears to be a clear horizontal deal that initially looks hard to pass. Justice has approved Google’s purchase of ITA and Comcast’s joint venture with NBC Universal, but those were so-called vertical mergers without significant overlapping businesses.

A source at the FCC said the merger will be an uphill battle for AT&T. The agency will choose someone to oversee the merger review, much like it did with the Comcast-NBC venture.

But James Cicconi , AT&T’s executive vice president of external affairs, is arguing that the deal will still leave plenty of competition and that a market-by-market analysis performed by Justice will prove it.

Public interest groups are growing louder in opposing the union. Consumers Union noted Tuesday morning that the average AT&T customer pays $50 more per month than a T-Mobile customer.

Cicconi stopped by The Post on Monday to talk to the editorial board about the deal. Here’s are some edited highlights from the discussion.

Q: Does this merger lead to a duopoly, and what does that mean for consumers?

A: After the deal, we’ll have about 43 percent of the market, but we won’t likely keep all those customers. We would continue T-Mobile’s plans for those customers.

Q: Indefinitely?

A: We wouldn’t say that. Indefinite is a long time, but we want to stress that T-Mobile customers will be offered the same plans. The thing to remember is that in 18 of 20 major markets there are five choices of wireless providers to choose from, so there is competition. And the Government Accounting Office found that after five major mergers in the industry, prices for consumers have gone down 50 percent adjusted for inflation.

Q: Is that for voice or data? Because data is really where everything is headed.

A: That’s for voice.

Q: You said you achieve 60 percent of the smartphone market largely because of your deal with Apple to carry the iPhone over your network. What would you say to a condition that prohibits you from those exclusive handset contracts, in order to let smaller players get a better shot at carrying the best devices?

A: In general, I don’t think it’s the role of the government to tell handset manufacturers how and to whom to sell devices. Exclusivity has spawned innovation like the Android operating system.

Q: How about stronger net neutrality provisions to your merger? The rules adopted by the FCC last December largely leave the wireless industry free of non-discrimination and blocking rules.

A: Anyone who looks at mobile applications and who has power, they will see the ones with power isn’t us. We enable any platform on devices. We run the highways, and that’s what we want to do. People who control the platform have the operating system. Our only interest is that we don’t end up with a situation where the network is harmed.

Q: How about jobs? Will this lead to layoffs. I believe your CEO, Randall Stephenson, said there will be significant overlap after the merger.

A: Let me clarify that. At AT&T we’ve never had significant layoffs after a merger. But of course there will be overlap. But we will deal with that through attrition.

Q: If you need this merger to combine spectrum of AT&T and T-Mobile to deal with the surge in smartphone data demands, what was your plan to deal with those needs pre-merger?

A: We had to find more spectrum through spectrum swaps or secondary markets. But this deal gets us to where we need to be. It will be many years before the government is able to free up spectrum, even if legislation passes this year for incentive auctions, which we hope it will do. This deal allows us, on our dime, to get to where we need to be and fulfill the president’s goal of getting 4G LTE wireless across the nation.

Q: So if I am AT&T or T-Mobile customer in 2015, without the merger what would my experience be like in say, New York City?

A: Without additional spectrum, by the fall of next year, we will be significantly constrained in New York city and elsewhere. So the dilemma is, What do you do when you are at that point? Do you regulate usage? Do you stop selling phones? Do you up the price of phone service?

The important thing to remember is that T-Mobile was going to leave the market anyway. It had no path toward LTE and had reportedly been in talks with Sprint Nextel before us. They came to us, and after much analysis and number crunching it made a lot of sense to us.

Related stories:

AT&T bids for T-Mobile

New York AG investigates AT&T, T-Mobile merger proposal

AT&T executive crucial to merger success

By  |  11:14 AM ET, 04/12/2011

 
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