Money Matters - Simplified

Is the AT&T/T-Mobile deal in danger?

AT&T claims the acquisition will lead to billions of dollars in investment and create as many as 96,000 quality jobs in the United States.

The chairman of the Federal Communications Commission (FCC), Julius Genachowski took steps Tuesday to thwart AT&T's proposed $39 billion takeover of T-Mobile USA.

Genachowski circulated a draft order among other commissioners asking for an administrative hearing on the acquisition.

The move was made after FCC officials concluded the AT&T's acquisition of T-Mobile will shrink competition among wireless carriers, lead to higher prices, less investment, massive job losses and hurt consumer interest.

Larry Solomon, senior vice president for corporate communications at AT&T, called the F.C.C.’s action “disappointing.”

He said, “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. At this time, we are reviewing all options.”

“The record clearly shows that – in no uncertain terms – this merger would result in a massive loss of US jobs and investment.”-- a senior FCC official

AT&T’s arguments
Meanwhile, AT&T claims the acquisition will lead to billions of dollars in investment and create as many as 96,000 quality jobs in the United States.

They also have plans to use T-Mobile’s towers and airways to improve wireless service quality to customers and expand the 4G network across most of the country, especially in rural areas.

Rejecting every part of AT&T’s arguments, a senior FCC official said, “The record clearly shows that – in no uncertain terms – this merger would result in a massive loss of US jobs and investment.”

2nd major govt hurdle
The FCC is the second government agency to question the AT&T/T-Mobile deal. The Department of Justice (DOJ) filed a civil antitrust lawsuit at the federal court Washington in August to block it.

If the FCC’s request goes through, the administrative hearing won't begin until after the DOJ trial against AT&T, which is scheduled to start Feb. 13.

With both the DOJ and FCC opposing the deal, experts say the chances of it going through are slim. If the deal fails AT&T will pay T-Mobile a break-up fee of around $6 billion in cash and spectrum rights under terms of its merger proposal.

Craig Moffett of Bernstein Research said to investors, “Ever since the Department of Justice filed in August to block AT&T’s deal to acquire T-Mobile, the deal was on life support. Yesterday, the FCC disconnected the respirator.”