AT&T Offers FCC More Analysis On Proposed Acquisition of T-Mobile

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At the request of the Federal Communications Commission, AT&T Inc. has filed a new engineering and economic analysis to justify its proposed $39 billion acquisition of T-Mobile USA. The analysis, submitted to the FCC late July 25, focuses on the pricing impacts of the deal and the likely efficiencies of the companies' combined operations in 15 U.S. markets.

Overall, AT&T predicts that the “proposed transaction will relieve significant capacity constraints faced by both companies and lead to improved service quality and expanded output of wireless service, among other public benefits.” In each market, AT&T says, the merger simulations project that “industry output will rise and average price adjusted for quality will fall as a result of the transaction.”

Much of the actual data AT&T filed is listed as confidential, and parts of the cover letter accompanying the new filing are also redacted.

In a statement released late June 25, Vonya McCann, a senior vice president at rival Sprint Nextel Corp., the chief opponent of AT&T's bid to take over T-Mobile, said AT&T's model was “clearly constructed with predetermined results in mind,” and does nothing to change the negative consequences of the takeover for consumers in the form of “higher prices, reduced innovation and decreased investment.”

‘Shot Clock' Stopped.

AT&T's filing of the documents marks a critical juncture in the FCC's review process. The FCC's Wireless Telecommunications Bureau had halted its “shot clock” on reviewing the merger until the models were filed and parties have a chance to review and comment on them.

“Despite suggesting that parties needed to make all arguments in their initial filings with the agency, the FCC has given AT&T this second chance to expand on its earlier rationales regarding supposed spectrum efficiencies and pricing effects of the transaction,” the public-interest group Free Press said in a statement.

Free Press said it will need more time to review and analyze the new arguments contained in AT&T's latest filing.

Franken Comes Out Against Merger.

Separately July 26, Sen. Al Franken (D-Minn.) urged federal regulators to reject the merger.

In a 24-page letter to Attorney General Eric Holder and Federal Communications Commission Chairman Julius Genachowski, Franken said that based on his analysis, the merger would result in less competition and higher prices for consumers, even with conditions. Following a similar letter by Sen. Herb Kohl (D-Wis.), chairman of the Judiciary Committee's antitrust subcommittee, Franken said the deal would create an “entrenched duopoly in the wireless industry.”

“It would concentrate enormous power over the entire telecommunications sector in the hands of only two companies and it would incentivize AT&T and Verizon to coordinate prices to the detriment of consumers,” Franken wrote. “This transaction is not in the public interest. If approved, it would result in greatly reduced competition, the potential loss of thousands of jobs, higher consumer prices, and less innovation in technology.”

The deal would vault AT&T past Verizon to become the nation's largest wireless carrier and give just two companies, AT&T and Verizon, 80 percent control of the U.S. market for wireless services, with AT&T and T-Mobile serving a combined 130 million users nationwide and Verizon serving 96 million. Sprint, meanwhile, ended calendar year 2010 with 50 million subscribers.

By Paul Barbagallo

For AT&T's redacted filings, visit http://op.bna.com/der.nsf/r?Open=rtar-8k5pbm . For Franken's letter, visit http://franken.senate.gov/files/letter/110726_Letter_DOJ_FCC_ATT_TMobile_Merger.pdf .