FCC blasts AT&T over T-Mobile merger claims


AT&T Inc. signage is displayed at the company's new store in Chicago, Illinois, U.S., on Friday, Sept. 30, 2011. The Federal Communications Commission said AT&T’s internal analysis and past practices contradict the company’s claims that its merger with T-Mobile would create jobs, according to an agency report released Tuesday. (Tim Boyle/BLOOMBERG)
November 29, 2011

The Federal Communications Commission said AT&T’s internal analysis and past practices contradict the company’s claims that its merger with T-Mobile would create jobs, according to an agency report released Tuesday.

The FCC’s 109-page document also offers a harsh assessment of AT&T’s other arguments for the blockbuster deal. The company, for instance, tried to show how consumers would benefit. But an analysis by the FCC found those arguments “unreliable and, at a minimum, raise substantial and material questions of fact.”

The report dealt another blow to AT&T and T-Mobile as the wireless giants work to salvage their $39 billion merger. The two companies already were facing a court battle with Department of Justice antitrust officials when the FCC also moved to block the deal last week, saying the deal would harm consumers.

Not wanting to face a war on two fronts, AT&T withdrew its merger application from the FCC, believing it should first focus on its case with the Justice Department.

AT&T protested the release of the report on Tuesday, arguing that the agency should have kept it private.

James Cicconi, executive vice president of AT&T, said the report was only a draft and that the company only had hours to review it on Tuesday.

“This report is not an order of the FCC and has never been voted on,” Cicconi said. “It has no force or effect under law, which raises questions as to why the FCC would choose to release it.”

An FCC official defended the decision. The official, who spoke on condition of anonymity in order to talk about the report freely, said the analysis would help parties evaluate the deal. An unredacted version of the FCC’s report will be shared with the Justice Department, which is taking AT&T to court to block the deal in February.

“What you have from the FCC is more in-depth analysis from individuals who can put a fine point on what the merger does for the industry,” said Jeff Silva, an analyst at Global Medley Advisors. “It supplements the homework Justice has already done.”

The FCC’s report states that internal documents and other evidence contradict AT&T’s claim that the merger is necessary for the company to build a high-speed network that could reach 97 percent of all Americans. The analysis also raises questions about whether AT&T would generate more jobs if it built out its network on its own.

“There are serious questions whether the merger of AT&T and T-Mobile would cause other public harms,” the FCC report said.

The analysis notes that AT&T’s wireless division had 70,000 employees in 2002. After three mergers its staff size is now 67,000.

Beyond the report, there are other indications that the federal government is committed to opposing the deal. Justice officials cancelled a meeting last week with AT&T executives who have said they are open to a settlement, according to a person familiar with the matter. The person spoke on the condition of anonymity because of the sensitive nature of the government lawsuit.

Experts say AT&T can try to present a new proposal to the FCC and Justice, with promises of big divestitures of the combined company.

But FCC Chairman Julius Genachowski signaled Tuesday that any new attempts at a merger will be met with similar concerns the agency found in its first review.

“Our review of this merger has had a clear focus: fostering a competitive market that drives innovation, promotes investment, encourages job creation, and protects consumers,” Genachowski said in a statement. “These goals will remain the focus if any future merger application is filed.”

Cecilia Kang is a staff writer covering the business of media and entertainment.
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