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Phone Company Chiefs Defend Proposed Mergers

By Mike Musgrove
Washington Post Staff Writer
Wednesday, March 16, 2005; Page E03

Four top telecommunications executives yesterday defended two major proposed industry mergers as good for U.S. consumers and the economy before a Senate panel studying possible anticompetitive impacts of the deals.

In late January, SBC Communications Inc. announced its intention to buy AT&T Corp. in a $16 billion deal, and last month, Ashburn-based MCI Inc. accepted a $6.75 billion purchase offer from Verizon Communications Inc. The two mergers were the subject of a hearing yesterday before the Senate Judiciary Committee.

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In his statement to the panel, SBC Chairman Edward E. Whitacre Jr. cited the economic advantages of consolidation, arguing that the U.S. telecommunications industry is "in turmoil" and needs these mergers to build companies strong enough to escape its years-long slump.

The executives faced a tougher line of questioning in yesterday's hearing than they did during a similar session two weeks ago before the House Energy and Commerce Committee.

Sen. Herb Kohl (D-Wis.) expressed disappointment that the witnesses at the hearing did not include any merger opponents and said the deals might undo the competition and innovation that he said resulted from the breakup of AT&T two decades ago.

"We must insist that the promise of tomorrow's technology is not stifled in its infancy by today's consolidation," he said.

MCI chief executive Michael D. Capellas said that "traditional notions of long-distance companies are obsolete" and that a merger would allow the new company to offer the bundled packages of communications services that its customers are starting to demand. Verizon chief executive Ivan G. Seidenberg argued that national security could be enhanced by the mergers because the combined companies would continue to invest in critical communications infrastructure.

Sen. Sam Brownback (R-Kan.) released a statement in which he "strongly" supported the SBC-AT&T merger. "Mergers create a larger, stronger, more financially secure company," Brownback said. "This can foster innovations and improvements in prices and service. It will also create more jobs in the long term."

Sen. Mike DeWine (D-Ohio) said news of the mergers had received an "unusually friendly" reception in the press and in the telecommunications industry "and one that I'm not sure is wholly deserved."

The evaluation of such large mergers can take a year's worth of investigation by federal regulators. And while Congress does not have authority to block or approve corporate mergers, some of yesterday's questioning seemed to suggest that the deals may eventually pass regulatory muster.

Kohl, for example, fired off the hearing's final question: "In the event this merger goes through, which of you gets the gold watch and which of you gets the corner office?"

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