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Posted at 11:26 AM ET, 08/01/2011

AT&T, T-Mobile merger gains state support

SOURCE: The Associated Press
West Virginia’s Public Service Commission last Friday approved AT&T’s merger with T-Mobile, becoming the third state utilities commission to greenlight the $39 billion deal. California and Hawaii are still reviewing the transaction.

West Virginia regulators noted that T-Mobile customers make up just 0.26 percent of the state’s wireless subscribers.

“The commission believes that the transaction will not adversely impact competition or have other adverse impact on this state,” the commission wrote in its approval order.

Arizona and Louisiana have also approved the merger.

Why do the state investigations matter? After all, it is federal regulators who will approve or reject the deal.

Analysts say state regulators can impose their own conditions on the deal — such as marketing restrictions and employment promises. And discussions from those state-level investigations and hearings are being watched by regulators at the Justice Department and the Federal Communications Commission.

“Decisions by states are not insignificant in that if a big state like California imposes a pricing restriction, for example, that is a huge number of people affected, which means there are very real costs involved,” said Jeffrey Silva, senior policy director at Medley Global Advisors, an investment firm.

The merger would put 80 percent of the nation’s cellphone contracts into the hands of AT&T and Verizon Wireless and remove a lower-cost alternative for consumers.

That fact has drawn opposition from some key lawmakers, including Sen. Herb Kohl (D-Wis.), who oversees antitrust issues.

“I have concluded that this acquisition, if permitted to proceed, would likely cause substantial harm to competition and consumers, would be contrary to antitrust law and not in the public interest, and therefore should be blocked by your agencies,” he wrote last month.

AT&T has tried to convince regulators to review the merger in terms of how it affects local markets.

The phone giant said new local competitors such as Metro PCS and Leap Wireless have entered the wireless market in recent years.

But Kohl noted that big national carriers have the upper hand when they rent their cell towers to smaller players. He added that exclusive handset agreements, such as the one between AT&T and Apple, make it hard for smaller carriers to attract customers because they aren’t able to strike similar deals for the hottest devices. AT&T and Verizon Wireless, for example, have the cash piles to offer subsidies for the iPhone and pick up marketing and sales costs for the device.


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By  |  11:26 AM ET, 08/01/2011

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