FCC chief declares AT&T/T-Mobile merger a turkey, prepares it for slaughter

Administrative hearing could spell death knell of proposed $39 billion merger

FCC Chairman Julius Genachowski dropped an unwelcome Thanksgiving treat on AT&T's lap Tuesday by announcing he wants an administrative hearing on the carrier's plan to gobble up T-Mobile.

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Genachowski today submitted a proposal for an administrative hearing on the $39 billion merger that AT&T first proposed earlier this year. If the full commission decides to request such a hearing before an administrative law judge, it could effectively end AT&T's T-Mobile takeover bid if the judge rules concurs with the FCC's assessment that the merger would not be in the public interest.

And even if AT&T and T-Mobile successfully countered the FCC's arguments at the hearing it would still further hold up the proposed acquisition for another year. As noted by The Wall Street Journal's Amy Schatz, the FCC hasn't sought such a hearing since 2002 when it requested one for a proposed merger of EchoStar and DirecTV. In that particular case both companies eventually decided to drop the merger proposal.

Essentially the FCC's actions today mean that AT&T and T-Mobile will have the opportunity to make their case for why the merger is in the public good before an administrative law judge. The FCC will counter.

AT&T was predictably not happy about Genachowski's decision and said it was reviewing "all options" to keep the merger afloat.

"The FCC's action today is disappointing," said Larry Solomon, AT&T's senior vice president of corporate communications. "It is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the U.S. economy desperately needs both."

The proposed administrative hearing is yet another headache for AT&T, which also faces a civil antitrust suit filed by the U.S. Department of Justice aimed at blocking the merger. In its initial filing of the antitrust suit, the DOJ argued that the proposed merger would significantly damage competition in the wireless industry, especially since T-Mobile has historically offered low-cost wireless voice and data services for customers. The DOJ also contended that any efficiencies gained by combining AT&T and T-Mobile spectrum would not be enough to offset the damage done to U.S. consumers by further consolidation of the wireless industry.

In the wake of the DOJ suit last summer, Genachowski issued a public statement that didn't directly support or oppose the DOJ's suit but that acknowledged that the FCC also had "serious concerns about the impact of the proposed transaction on competition."

AT&T's proposed merger with T-Mobile has come under criticism from consumer groups, rival wireless carrier Sprint and analyst firms such as the Yankee Group, who contend that the merger will lead to the emergence of a duopolistic wireless telecom market controlled largely by Verizon and AT&T. Were the merger to pass regulatory muster, it would be the fourth major wireless carrier merger in eight years, following AT&T-Cingular in 2004, Sprint-Nextel in 2005 and Verizon-Alltel in 2008. AT&T would become by far the largest wireless carrier in the United States with more than 130 million subscribers.

Learn more about this topic

Feds move to block AT&T/T-Mobile merger 

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