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FCC releases a damning report on AT&T's buyout of T-Mobile USA

AT&T's $4bn bill looms ever closer
Wed Nov 30 2011, 17:41

AGGRESSIVE TELECOM AT&T has criticised the Federal Communications Commission (FCC) release of a scathing report on the firm's attempted purchase of T-Mobile USA from Deutsche Telekom.

Earlier the FCC had acknowledged AT&T's decision to withdraw its application for FCC approval of the T-Mobile deal after the firm had threatened the FCC with legal action. However that didn't stop the FCC from releasing a redacted 157 page interim report. Wading through the report it is clear that AT&T and Deutsche Telekom would not get approval from the FCC.

Ever since AT&T proposed the $39bn purchase of T-Mobile USA from Deutsche Telekom many have been worried about lack of competition should the deal be allowed to go ahead. Even the US Department of Justice (DoJ) has begun litigation to stop the purchase, which both AT&T and Deutsche Telekom are set to defend.

In the FCC's report the Commission states, "We conclude that the loss of T-Mobile [USA] as a competitive alternative would give post-merger AT&T a unilateral incentive to raise price (or, to similar effect, to reduce the service quality or otherwise exercise market power) and would also confer a unilateral incentive to raise price on non-merging rivals, including Verizon Wireless and Sprint."

The FCC continued, stating its concerns regarding lack of competition, which clearly made AT&T unhappy. Jim Cicconi, AT&T senior executive VP for external and legislative affairs said the firm had no prior notice of the FCC's decision to release the report. Cicconi bleated, "It has no force or effect under law, which raises questions as to why the FCC would choose to release it. The draft report has also not been made available to AT&T prior to today, so we have had no opportunity to address or rebut its claims, which makes its release all the more improper."

It's no surprise that Cicconi and AT&T are trying to downplay the significance of the FCC's interim report, as some of the FCC's statements are brutal. Regarding anti-competitive practices the FCC said, "AT&T's acquisition of T-Mobile also threatens to harm competition by making coordination among the sellers of retail mobile wireless services more likely and/or more effective." Coordinated efforts arise when competing firms, on recognising their interdependence, take actions "that are profitable for each of them only as a result of accommodating reactions of the others".

Given that the FCC has made its interim report public, it should galvanise opposition against AT&T and Deutsche Telekom. AT&T's argument for its buyout of T-Mobile USA hinges on better service to customers and creation of jobs. At least on the point of better service, it seems that the FCC wasn't buying what AT&T's lobbyists were selling.

AT&T has already indicated that it will incur a $4bn loss from its attempt to buy T-Mobile USA. Having given up on the FCC, AT&T and Deutsche Telekom will need a miracle to overcome the DoJ lawsuit opposing the proposed deal after the FCC's demolition. µ


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