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May 12, 2011

Lawmakers Remain Highly Skeptical of AT&T, T-Mobile Merger

By Beecher Tuttle, TMCnet Contributor

AT&T's (News - Alert) pending $39 billion acquisition of rival T-Mobile met significant resistance on Wednesday when a handful of skeptical lawmakers questioned whether the deal would create a monopoly, impede competition and be disadvantageous to consumers.



T-Mobile Chief Executive Philipp Humm and AT&T CEO Randall Stephenson were assembled in front of a Senate subcommittee on Wednesday to discuss the motives behind and ramifications of the proposed merger, announced in March, which would bring together the second- and fourth-largest wireless carriers. The deal would give AT&T and Verizon nearly 80 percent of the market share, and could spell the end for smaller carriers like Sprint (News - Alert), which has urged Federal regulators to nix the merger. The FCC and the Department of Justice are currently investigating the deal.

Humm and Stephenson told the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights that the acquisition would allow the joint company to provide next-generation services to a broader range of consumers and would eventually result in lower wireless pricing, according to the LA Times.

"It's a very basic concept that, in any industry, greater capacity is a fundamental driver of competition," Stephenson said. "Over the last decade, U.S. wireless prices have steadily come down, and this transaction will allow that to continue."

AT&T's chief executive also noted that he didn't consider T-Mobile to be a close competitor – a statement that committee members found to be dubious, says the Wall Street Journal.

"Is it really credible to come up here and sit here and tell us that you and T-Mobile are not close competitors?" asked subcommittee chair Herb Kohl (D., Wisc.),who went on to mention T-Mobile's habit of undercutting the pricing of Verizon (News - Alert) and AT&T.

Other democrats on the committee echoed Kohl's sentiments, noting that the merger could take the U.S. back to the times of the "Ma Bell" monopoly, when AT&T had a stranglehold on the land-line telephone business.

Also testifying at the hearing was Sprint CEO Dan Hesse, who said the proposed merger could force his company to eventually sell itself off to AT&T or Verizon.

"If the Justice Department and Federal Communications Commission decide to permit the takeover, the wireless industry would regress to a 1980s-style duopoly," Hesse told the lawmakers.

Many analysts believe that the deal will struggle to find approval from the Federal regulators, who have to decide if the merger would adversely affect competition and be in the best interest of the public. The Obama administration's hard stance on antitrust issues further clouds the deal.

"I think there's still probably a lot of folks at [Justice] and the FCC (News - Alert) who aren't persuaded yet they should approve the deal," Rebecca Arbogast, an analyst at brokerage Stifel, Nicolaus & Co, told the LA Times. "I still think there's a material risk the deal might get blocked, but I think it's more likely that it gets passed."

Stay tuned to TMC (News - Alert) for more updates from Capitol Hill.


Beecher Tuttle is a TMCnet contributor. He has extensive experience writing and editing for print publications and online news websites. He has specialized in a variety of industries, including health care technology, politics and education. To read more of his articles, please visit his columnist page.

Edited by Stefanie Mosca

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