AT&T Withdraws Merger Application, Threatens To Sue FCC
AT&T is threatening to sue the Federal Communications Commission if it fails to address the company's move to withdraw its application to buy T-Mobile USA.
On Nov. 23, AT&T and Deutsche Telekom AG electronically withdrew the pending applications they had filed last spring. At that time, the companies said they planned to overcome antitrust hurdles and continue pursuing the sale of Deutsche Telecom's U.S. wireless assets to AT&T.
"We believe the record will show that we withdrew our merger application before the FCC voted on the chairman's proposed hearing designation order. It has since been reported that the FCC must approve this withdrawal. This is not accurate," said Wayne Watts, AT&T's senior executive vice president and general counsel, in a statement.
"The FCC's own rules give us this right and provide that the FCC 'will' grant any such withdrawal. Further, this has been the FCC's own consistent interpretation of its rules. We have every right to withdraw our merger from the FCC, and the FCC has no right to stop us. Any suggestion the agency might do otherwise would be an abuse of procedure which we would immediately challenge in court."
Cutting the Industry in Half
Strong words from a disappointed AT&T. AT&T had hoped to acquire T-Mobile for $39 billion, but has met with resistance from industry competitors, the Department of Justice and the FCC, despite AT&T's willingness to bring overseas jobs back home as part of the deal.
AT&T seems to have made a smart move with the withdrawal, though, as the deal looked nearly impossible to pull off, according to Rob Enderle, principal analyst at Enderle Group. FCC Chairman Julius Genachowski all but rejected the deal and the Department of Justice filed an antitrust suit against AT&T to block the merger.
"The problem for AT&T is that the acquisition would make the company so large that the only reasonable way Verizon and Sprint could compete would be to merge themselves, which clearly would be something that is not in the public's best interest," Enderle said. "It's hard to deny one merger if you accept the other. There are so few competitors in this space that collapsing the largest and the smallest together creates a problem for the two in the middle."
A Hard Rocky Place
The scenario for both AT&T and T-Mobile is uncertain from here. AT&T is somewhat in between the proverbial rock and hard place. If the merger doesn't go through, AT&T would have to pay hefty penalties to T-Mobile. Enderle said those fines are so great that it could help T-Mobile become a more powerful competitor.
On the other hand, the original agreement indicates that the two companies will more closely cooperate with regard to spectrum sharing, which could in the end make for a much better environment for consumers. As Enderle sees it, if the overall goal is to improve the lot of U.S. citizens, blocking the deal could have the greatest benefit.
"A phone you buy from AT&T won't work at the same level at T-Mobile. While you should have portability between the vendors, you don't currently. As I understand it, the way the separation agreement is written, that will be fixed," Enderle said. "So at the very least consumers will get a better choice than they otherwise would have had if the two had been rammed together."
