After a burst of publicity around the mooted merger of AT&T and T-Mobile in the US it all went slightly quiet (once the booing died away). Now the FCC looks like it will torpedo the deal on competition grounds. By Ian Scales
Federal Communications Commission Chairman Julius Genachowski is understood to have circulated a draft order to the other four commissioners on the FCC, recommending that the agency refer the case to the courts. That decision is understood to mean that the deal has probably been holed below the waterline unless AT&T cuts up rough and chooses to fight.
According to reports, the FCC claims that its investigations have shown that 99 out the top 100 markets in the US wouldn't be more competitive should a merger between the largest US telco and the struggling T-Mobile be approved.
AT&T, of course, had been claiming that the merger would give it the scale to roll out LTE services faster and that the entire market would be a winner because more jobs would be created. It sounded like a shakey argument at the time and now the FCC seems to have done the due diligence required to object to the deal.
The situation has changed mightily since the plan was announced in March this year. Then AT&T was so confident it would get a green light that it underpinned the deal with a substantial break-up penalty.
If it fell through AT&T was to pay a US$3 billion fee and transfer spectrum and other assets to T-Mobile of about the same value.
But a flurry of law suits against the merger from competitors (Sprint Nextel and Cellular South) as well as from the US Department of Justice followed.
Now, with both the FCC and the DoJ against the merger, observers say there is little prospect of it going through, although it is possible that AT&T could continue to fight, especially if it won the case mounted by the DoJ which is due to begin hearings in February.
AT&T's top communications man, Larry Solomon, said the company was disappointed by the FCC's decision and that it's now "reviewing all options."
T-Mobile, meanwhile, looks like winning either way. If the deal fails it stays independent and gets a nice bundle of cash. As observers point out it hasn't slackened off on its marketing and has built a strong portfolio of Android devices for the holiday season: a $6 billion Christmas present from AT&T would get its next year off to a fine start.
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