The chairman of the Federal Communications Commission (FCC) said Tuesday that he opposed AT&T's proposed $39 billion merger with T-Mobile because it would lead to higher prices for consumers and big job losses. The chairman, Julius Genachowski, has sent a draft order to the other FCC commissioners, asking for the deal to be sent to an administrative law judge for review.
The move could signal curtains for the proposed deal. While the FCC cannot by itself block the purchase, a judge can. The request to send it to a judge needs to be approved by the FCC commissioners, who will meet again in the middle of next month.
Genachowski said his conclusion was based on review by the agency of hundreds of thousands of documents, dozens of petitions opposing the merger, and meetings with both companies.
In a statement, Larry Solomon, AT&T senior vice president of corporate communications, called the action "disappointing" and said AT&T was reviewing its options. He added that it was "yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs."
The Communication Workers of America union is backing AT&T, telling news media that "the path to secure jobs is through massive investment in a 4G LTE network across America," and noting that T-Mobile by itself cannot make that investment.
As expected, Sprint, which had opposed the deal, sang a different tune. Senior Vice President of Government Affairs Vonya McCann said Sprint appreciated "Chairman Genachowski's leadership on the issue," and that the company looked forward "to the FCC moving quickly to adopt a strong hearing designation order."
T-Mobile Losing Customers
The U.S. Justice Department filed an antitrust lawsuit against AT&T in August, with the hearings before a federal judge beginning in February. Justice said that "the elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market."
The one-two punch of the FCC and the Justice Department, if either or certainly if both successfully move forward, would most likely be enough to kill the deal -- although AT&T could always pursue appeals.
There might be other alternatives for the two companies, such as AT&T taking a lesser share of T-Mobile. AT&T has a major incentive to keep moving forward, in that it has agreed to pay $3 billion in cash, plus some spectrum, if the deal collapses.
Bill Ho, an analyst with industry research firm Current Analysis, said that, if the deal does fall apart, the benefits to consumers "will be short-lived, unless T-Mobile can turn itself around."
The German owners, he said, "want to get out of the market," and T-Mobile continues to lose customers -- even though its price plans are often the cheapest around. Ho said he didn't believe a merger of Sprint and T-Mobile seemed like a good match, "either from a technology or cash viewpoint," although there was always the possibility of another suitor who did not raise the same issues that AT&T did.