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
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
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."
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
quote: I support the Tea Party's idea of cutting government spending, but I sincerely disagree with their assessment that this merger could be a good thing.
quote: Senator Mike Lee ( R -Utah)
quote: Verizon also donated directly to Sen. Lee's election campaign and fellow Tea Party members in the Senate.