If one AT&T executive is considered crucial in the company’s quest to win over federal regulators and merge with T-Mobile USA, that person would be James W. Cicconi. At the helm of AT&T’s vast lobbying operation, the veteran Republican playmaker displays little fear that his company’s wager — gobbling up a small competitor to form a wireless industry giant — will fail.
“We don’t believe for a moment that [a rejection] will occur. We’re a very careful and cautious company in our strategic decisions,” Cicconi said. He added that the company has no need for a backup plan, such as filing suit against the government if regulators nix the deal. “We understand the antitrust laws . . . and we’ve examined all these with great care. We wouldn’t be doing this deal if we did not expect approval.”
A look at AT&T and T-Mobile.
March 22 (Bloomberg) -- Jeffrey Silva, an analyst with Medley Global Advisors LLC, discusses AT&T Inc.'s agreement to buy Deutsche Telekom AG's T-Mobile USA unit for $39 billion and the outlook for regulatory approval of the deal. Silva speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
But AT&T faces risks if its proposed $39 billion acquisition of T-Mobile does not receive the blessing of the Justice Department and Federal Communications Commission, the two agencies charged with approving the deal. First, it would have to hand over to T-Mobile $3 billion in breakup fees, which is about three times the profit AT&T made in last year’s fourth quarter. Without T-Mobile’s added spectrum, AT&T would also continue to struggle with its 3G wireless network, which has been frequently criticized for dropped calls.
The company “would have to go back and redesign their business plan” if the merger fell through, said Rep. Edward J. Markey (D-Mass.), who has authored major telecommunications legislation. “But Jim [Cicconi] has extremely impressive legal and political skills, and he has a very deep knowledge of telecommunications law. . . . I have been privileged to have him on my side, but he is also a formidable opponent when he is on the other side.”
Cicconi argues that a negative verdict from regulators could wind up hurting consumers and raising prices. That’s because AT&T would be effectively blocked from expanding its capacity to serve the ravenous market for high-speed mobile Internet.
“If a company like ours is having bandwidth constraints, you have to ration that bandwidth — pricing is usually the way you do it,” he said. “That’s the story we’re going to lay out at the Justice Department and FCC, and that’s why we hope consumers keep an open mind.”
Public interest groups contend the opposite — that the merger would reduce competition and lead to higher prices. Cathy Sloan, a vice president of the Computer & Communications Industry Association, a Washington-based trade group that opposes AT&T’s merger, said Cicconi’s price threats reflect the swagger of a dominant company.
“That is the classic case of the monopoly power saying, ‘If you don’t give us what we want, we’ll raise prices.’ The reason they get away with it is because they have a stranglehold on the market,” Sloan said. “Jim’s very professional. But that doesn’t mean he doesn’t play hardball on behalf of one of the nation’s largest telecom carriers that was already broken up once and is pushing the envelope again.”