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  (Source: TechnicalJones)
AT&T fires back, saying politicians love the deal

The telecommunication industry’s bid to continue its consolidation hit a roadblock on Wednesday when the U.S. Senate's antitrust committee ruled against AT&T Inc.'s (T) proposed $39B USD acquisition of Deutsche Telekom AG's (ETR:DTE) T-Mobile USA.  The issue was not voted on by the whole Senate and the committee has no real power to enforce its suggestion; however, the U.S. Federal Communications Commission (FCC) and the U.S. Department of Justice (DOJ) often heavily consider the Senate committee's recommendation in such matters.

I. Senate Committee Concludes Merger Would Hurt Market

Sprint Nextel Corp. (S), the U.S. mobile phone industry's third largest carrier, has been rallying against the merger which would leave only two companies -- AT&T and Verizon Wireless (VZ) controlling over 80 percent of America's phone subscribers.  Sprint says the merger would destroy competition on the market and "stifle innovation."

Senator Herb Kohl (D-Wisc.), chairman of the antitrust committee, stated, "I have concluded that this acquisition, if permitted to proceed, would likely cause substantial harm to competition and consumers, would be contrary to antitrust law and not in the public interest, and therefore should be blocked by your agencies."

The announcement comes shortly after high-ranking members of the U.S. House of Representatives expressed doubts of their own.  Representative Anna Eshoo (D-Calif., 14th District), chairwoman of the House Energy and Commerce Communications and Technology Subcommittee, Rep. John Conyers (D-Mich., 14th District), and Congressman Edward Markey (D-Mass., 7th District) wrote a letter to the DOJ and FCC complaining about the possible merger.

They write, "We believe that AT&T's acquisition of T-Mobile would be a troubling backward step in federal public policy–a retrenchment from nearly two decades of promoting competition and open markets to acceptance of a duopoly in the wireless marketplace. Such industry consolidation could reduce competition and increase consumer costs at a time our country can least afford it."

II. AT&T's Supporters, Including Tea Party Members Fire Back

The criticism ostensibly came as a shock to AT&T, who claims to have thought the merger to be on the fast track for a March 2012 approval.  AT&T claims that the merger will allow it to deliver "net job growth" to the nation and improve signal quality and coverage.

AT&T released a response to the U.S. Senate committee, commenting:

We respect Senator Kohl. However, we feel his view is inconsistent with antitrust law, is shared by few others, and ignores the many positive benefits and numerous supporters of the transaction. This is a decision that will be made by the Department of Justice and the FCC under applicable law and after a full and fair examination of the facts. We continue to believe those reviews will result in approval of this transaction.

AT&T claims the merger is supported by 26 governors, 76 (of the 193) Democratic members of congress, 72 mayors, and unions that represent 20 million members.

It also pointed to a statement by Senator Mike Lee (R-Utah), who opined, "The mobile phone market is a critical component of our nation’s economy and the proposed merger between AT&T and T-Mobile deserves careful review. In my view, the merger has the potential to provide significant network efficiencies that may help alleviate capacity constraints, enable enhanced service quality, and facilitate expansion of a 4G LTE nationwide network, which would in turn create opportunities for handset innovation and continued development of data-rich applications."

AT&T donated $377,500 in direct donations to Sen. Lee and his Tea Party colleagues in Congress this last year.  

Verizon also donated directly to Sen. Lee's election campaign and fellow Tea Party members in the Senate.  Verizon has declined to officially support or oppose the merger, with chief executive Dan Mead saying he was "not concerned" about the possibility.  Some analysts believe that Verizon wants the merger, as it could gain subscribers during the distracting and cumbersome business melding process.

Such donations are likely to play a bigger role in politicians’ opinions in coming issues after a January narrow 5-4 U.S. Supreme Court decision in Citizens United v. Federal Election Commission overturned two previous decisions, which had placed limitations on corporate cash funneling to federal politicians.  Many believe this will lead to corporations "buying" the laws that they want, and politicians who refuse to cooperate being run out of Washington by candidates with more well lined pockets.

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RE: If Sprint is so good....
By tng on 7/21/2011 1:26:48 PM , Rating: 2
I am sure that Sprint knew and tried to acquire T-Mobile even before AT&T announced, but sadly Sprint probably does not have the funds to cover such a buyout.

RE: If Sprint is so good....
By nidomus on 7/21/2011 4:51:24 PM , Rating: 2
Sprint tried to. T-Mobile valued itself at between 20-30 billion dollars. Sprint, having a market cap of roughly 14 billion with 50% more subscribers and revenue, thought T-Mobile was asking too much and talks broke down.

RE: If Sprint is so good....
By mcnabney on 7/21/2011 5:41:06 PM , Rating: 3
Yes, after the merger with Nextel worked out so well, they decided that instead of fixing their own company (they haven't actually been profitable for almost six years) they would try to buy another.

Because if there is one thing that will make a wireless company more efficient is operating EVERY DAMN TYPE OF WIRELESS NETWORK THAT EXISTS! So if T-Mobile and Sprint merged they would concurrently operate CDMA/1xRTT/EVDO-0/EVDO-A/Wimax/iDEN/EDGE/HSPA/HSPDA /HSPA+/GSM and LTE (planned). Hell, maybe there might be some TDMA floating around somewhere too. Outrageously stupid.

/a non-wireless company needs to buy T-Mobile
//and a different one needs to buy Sprint to save it from itself.

RE: If Sprint is so good....
By Solandri on 7/21/2011 6:47:07 PM , Rating: 2
Because if there is one thing that will make a wireless company more efficient is operating EVERY DAMN TYPE OF WIRELESS NETWORK THAT EXISTS! So if T-Mobile and Sprint merged they would concurrently operate CDMA/1xRTT/EVDO-0/EVDO-A/Wimax/iDEN/EDGE/HSPA/HSPDA /HSPA+/GSM and LTE (planned). Hell, maybe there might be some TDMA floating around somewhere too. Outrageously stupid.

Sprint sold off some of their towers (and immediately leased rights to use them from the new owners) to raise capital. But a consequence of this is that they're becoming a technology-agnostic carrier. If they don't own the towers, what do they care what technology it uses? They just sign service agreements with tower owners at sufficient capacity to provide service to their customers with phones using each specific technology. So yes they could concurrently operate CDMA and GSM networks. They already concurrently operate Nextel's iDEN network.

Arguably, this is really the way the industry should be. The carriers sell service to customers, but don't own any towers. The tower owners sell service to carriers, but don't sell to customers. This makes it a level playing field for everyone. A new company trying to break into the carrier market doesn't need the huge capital investment in towers and frequencies to compete. All they need is enough contracts with tower owners to provide nationwide coverage. And a new company trying to break into the tower market doesn't need a large pre-existing base of customers in order to compete. You could operate a single tower in your backyard in a poor coverage area, and sell access to it to carriers.

And GSM and iDEN are TDMA.

RE: If Sprint is so good....
By Reclaimer77 on 7/21/11, Rating: 0
RE: If Sprint is so good....
By mcnabney on 7/21/2011 9:17:08 PM , Rating: 2
Ahh, you do know that Sprint doesn't even operate THEIR OWN DAMN NETWORK?

So the third biggest carrier in the US is technically Sony-Ericsson. They have run it for a couple years now.

"If you can find a PS3 anywhere in North America that's been on shelves for more than five minutes, I'll give you 1,200 bucks for it." -- SCEA President Jack Tretton

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