The chances for the $39 billion AT&T/T-Mobile merger succeeding have just gone from bad to much, much worse.
Although the Federal Communications Commission on Tuesday granted AT&T’s request to pull its merger application from review, giving AT&T time to retool the plan in private, the FCC also published a damning, lengthy report outlining why it wasn’t convinced the merger was in the public interest in the first place.
“…The Applicants [AT&T and T-Mobile] have failed to meet their burden of demonstrating that the competitive harms that would result from the proposed transaction are outweighed by the proposed benefits,” the report states.
Specifically, the report states that the FCC basically agrees with the Justice Department that the deal would harm consumers by reducing competition and resulting in increased prices and fewer service options in the mobile phone market.
The DOJ was conducting a separate review of the merger and filed an antitrust lawsuit against AT&T in September to block it. That case is still going forward, with arguments set to begin in a February 13, 2012 hearing.
FCC officials said in a Tuesday press conference that the report had actually been drafted ahead of a planned FCC hearing on the merger, which had fist been reported last week on November 22.
AT&T on November 24 subsequently moved to pull its application from the FCC’s review process to avoid the hearing, which would have involved testimony from witnesses against the merger.
Still, the FCC had to approve AT&T’s request or deny it and go ahead with the merger.
Advocacy groups against the merger, including Public Knowledge and the Media Access Project, had filed a letter with the FCC on Monday imploring the agency to block AT&T’s request, arguing the hearing should go ahead as planned.
While that won’t happen now, there was no mistaking the disappointment and anger from AT&T following the FCC’s decision on Tuesday to allow the withdrawal alongside the publication of the FCC’s report.
As AT&T’s Senior Executive VP of External and Legislative Affairs Jim Cicconi said in a statement:
“The FCC has recognized that it is required by its own rules to dismiss our merger application. This makes all the more troubling their decision to nonetheless release a preliminary staff report on the merger.”
Cicconi continued: “This report is not an order of the FCC and has never been voted on. It is simply a staff draft that raises questions of fact that were to be addressed in an administrative hearing, a hearing which will not now take place. It has no force or effect under law, which raises questions as to why the FCC would choose to release it. The draft report has also not been made available to AT&T prior to today, so we have had no opportunity to address or rebut its claims, which makes its release all the more improper.”
AT&T’s opponents, among them Public Knowledge and Sprint, which has filed it’s own, separate antitrust lawsuit against AT&T, were elated with the publication of the report, as they can now use it to prepare for their own arguments against the merger.
As Sprint’s Senior VP of Government Affairs Vonya McCann said in a statement emailed to TPM late Tuesday night: “FCC Chairman Genachowski and the staff of the Commission have listened to the American consumer. Consumers are best served when competition is allowed to thrive.”
McCann added: “At Sprint we share this view and applaud today’s actions by the FCC. The investigation’s findings are clear: approval of AT&T’s bid for T-Mobile would lead to higher prices for consumers, eliminate jobs, harm competition, and dampen innovation across the wireless industry.”
Public Knowledge co-founder Gigi B. Sohn sounded much the same note in a statement published late Tuesday,
“The information that the FCC compiled over much of this year should spell the end of AT&T’s attempted takeover of T-Mobile. The Commission was prepared to challenge on the basis of its investigation the justifications AT&T gave for the takeover, including those that the deal would somehow create tens of thousands of jobs.”
The question now remains, how, if at all, AT&T and T-Mobile can work out a plan to divest enough of either company’s assets (most likely T-Mobile’s) to make the deal acceptable to federal regulators. But given the way those regulators have treated the merger so far, it’s difficult to see any re-tooled plan getting a good reception.