A lot has happened since news broke in March that AT&T planned to acquire T-Mobile USA. Here’s a rundown of what led up to the merger, who’s for and against the deal, and where it goes from here.
This week marks the first major deadline in the FCC’s review of AT&T’s mega-merger with T-Mobile USA, which will make it the largest wireless operator in the country and further consolidate an already condensed industry.
Anyone who wants the FCC to block AT&T’s merger with T-Mobile has until the end of the day (May 31) to file their opposition – the FCC calls it a “petition to deny” – with the agency.
So far, more than 15,000 comments have poured into the FCC about the merger. The volume of comments surged by the thousands last week as people flocked to a website set up by Free Press that made it easier for consumers to voice their opposition to the deal, with more than 10,000 comments filed through the site in a single day last week.
Since AT&T announced its $39 billion bid to buy T-Mobile on March 20, the companies have withstood a storm of criticism over the deal, sat through interminable hearings in the House and Senate and explained again and again why regulators should allow the deal to pass.
And this is just the beginning.
Last year at this time, most of the rumors circulating around the future of T-Mobile centered on a possible merger with Sprint. But AT&T had its eyes set on T-Mobile, and ultimately, AT&T used its formidable financial resources to outbid Sprint to the tune of $39 billion, plus a considerable financial cushion for T-Mobile parent Deutsche Telekom if the deal fell through.
Top in the minds of many people was the question of why AT&T had decided to buy T-Mobile in the first place. After all, wasn’t Sprint the one that needed the market share? Surely, AT&T was able to compete on its own without buying out a competitor.
As AT&T explained, the deal was about capacity. By acquiring T-Mobile, with its parallel spectrum holdings, identical network technology and the complementary cell tower placement, AT&T put itself on the fast track to bulwarking its network against an onslaught of mobile data consumption.
AT&T also threw in some added enticements to convince regulators and lawmakers that the deal would be beneficial to consumers, claiming the merger would improve service and allow it to expand its LTE network to an additional 55 million people in rural America.
AT&T has repeatedly tried to put to rest concerns about the effect of consolidation on the wireless industry, telling the FCC its takeover of T-Mobile would not diminish the competitiveness of the industry.
There have been a lot of developments since AT&T pitched the merger to its customers, regulators and lawmakers in April.
The Department of Justice (DOJ) and the FCC have begun their review of the deal, with the DOJ moving to conduct an extended investigation; both the House and the Senate have held hearings; and groups on each side of the merger have begun lobbying efforts to get the deal either blocked or approved.
The FCC and the DOJ are possibly the only ones not commenting on the merger – they’re maintaining what amounts to a media blackout until they complete their months-long review of the deal – but it seems that everyone else from the Rural Cellular Association (RCA) to the National Association of Moms in Business have weighed in with an opinion on the deal.
Camp A: Block the Deal
Sprint, to nobody’s surprise, was one of the first to come out against the merger, followed shortly by the Rural Cellular Association and Cellular South. Consumer advocacy groups like Public Knowledge and Consumers Union also announced their opposition to the deal and began working to get consumers to join their fight against the merger soon after it was announced.
State attorney generals from New York, Connecticut and Minnesota planned to review the deal, and lawmakers were less than friendly to AT&T and T-Mobile executives at Senate and House hearings about the merger.
The transaction has garnered considerable attention on Capitol Hill. Senator Al Franken (D-Minn.) and Congressmen Ed Markey (D-Mass.) and John Conyers Jr. (D-Mich.) have been the most high-profile lawmakers to express concerns about the deal, but other legislators have expressed concerns as well, including Senator Herb Kohl (D-Wis.) and Representative Bob Goodlatte (R-Va.)
Sprint has pulled out all the stops in its effort to get the deal blocked, unleashing a swarm of lawyers and lobbyists to dissect the transaction. The company is petitioning state public utility commissions in hopes that a state-level block of the deal could put the merger on ice, but it’s unclear how successful its efforts will be since the consensus view appears to be that the FCC and DOJ have final authority over the transaction. So far, only Calfornia’s Public Utilities Commission has agreed to conduct an investigation into the merger.
With a merger on the scale of AT&T’s and T-Mobile’s – a deal which will make AT&T the largest wireless operator in the country and give it a near-duopoly hold on the wireless market with Verizon Wireless – it’s easy for opponents to make the case that the deal would have a deleterious effect on competition.
Those against the deal claim it will quash competition, raise prices, limit consumer choice, result in job cuts and ultimately reduce incentives to bring out innovative new products.
Some also have pointed out that many of AT&T’s rationales for the deal – namely improvements to its network and an expansion into underserved rural areas – could be accomplished without taking over T-Mobile.
Whether efforts to get the deal blocked will be a success is anybody’s guess. The wireless industry has been on a steady path to consolidation for the past decade without much interference from regulators. With the recent approval of the massive merger between Comcast and NBC Universal fresh in their minds, it’s unclear how squeamish they’ll be about a transaction on the scale of AT&T’s buyout of T-Mobile.
On the other hand, the FCC has expressed concerns about consolidation within the wireless industry. Perhaps AT&T’s attempt to purchase T-Mobile will be one step too far.
Camp B: Approve the Deal
While the argument against the deal is one that has been trotted out for many mergers through the years – that it will reduce competition, raise prices, decrease choice for consumers and harm jobs – the argument for the merger is a little more complex, especially when it comes to explaining how the deal will benefit the public.
AT&T will have to prove to regulators that it is in the public interest to approve the merger, and it has made some pretty bold claims to that effect, saying the deal will “preserve and promote competition,“ not harm it.
Aside from whether lawmakers buy AT&T’s logic about the state of competition in the wireless industry, the company’s pledge to expand its LTE network to an additional 55 million people has been particularly attractive to legislators interested in pleasing their constituents.
A group of nine governors comprised of Bobby Jindal (R-Louisiana); Mike Beebe (D-Ark.); Nathan Deal (R – Ga.); Rick Snyder (R-Mich.); Paul LePage (R-Maine); Mary Fallin (R-Okla.); Butch Otter (R-Idaho); Rick Perry (R-Texas) and Nikki Haley (R-S.C.) came out in support of the deal in time for AT&T CEO Randall Stephenson’s May 26 testimony before the House Judiciary Committee.
Each of the governors cited the benefit of AT&T’s expanded LTE network as a principal motivator for their support.
The company’s promise to expand broadband access also prompted several small business groups to support the deal, such as the Missouri Merchants and Manufacturers Association and the Economic Development Alliance of Jefferson County, Arkansas.
The NAACP, AFL-CIO and the Communications Workers of America (CWA) also support the merger, citing the advantages of expanded broadband access and an increase in union jobs that would result if the deal is approved. AT&T employs a large number of union workers; T-Mobile does not.
Even the Sierra Club – a proponent of increased broadband Internet services – has expressed optimism about the deal.
So Where Do We Go From Here?
The FCC has some set deadlines coming up for comments on the merger. After today, stakeholders have until June 10 to issue their rebuttals to oppositions to the merger, and replies to those comments are due June 20.
The FCC isn’t expected to issue a decision on the deal until March 2012, at the earliest.
In the meantime, we can expect more pontificating from lawmakers, more vitriol from opponents to the deal and increasingly detailed explanations from AT&T about why regulators should allow its takeover of T-Mobile to take place.
If approved, AT&T’s buyout of T-Mobile will have a wide-reaching effect on the wireless industry. The combined company will become the largest wireless operator in the country with about 120 million subscribers. The deal also will give AT&T and Verizon Wireless a combined 80 percent share of the U.S. wireless market.