AT&T Threatens to Sue FCC if Feds Block Withdrawal of Proposed T-Mobile USA Acquisition

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In the latest twist to the troubled proposal for AT&T to acquire T-Mobile USA, AT&T has threatened to file a lawsuit against the FCC. At issue is whether the Federal Communications Commission will grant an OK to the withdrawal of the $39 billion take-over.

Last week, AT&T and Deutsche Telekom AG (T-Mobile USA’s parent company) withdrew the proposed merger. Still, both firms say they will want the merger to go through and claim the law is on their side.

“We have every right to withdraw our merger from the FCC, and the FCC has no right to stop us,” according to a statement from Wayne Watts, AT&T's senior executive vice president and general counsel, quoted by Newsfactor.com. “Any suggestion the agency might do otherwise would be an abuse of procedure which we would immediately challenge in court."

AT&T says it withdrew the application to concentrate on the upcoming antitrust suit with the Justice Department, set to begin in February, according to a report from TechZone360. The company says it would reapply with the FCC after winning the suit or coming up with a settlement with the Justice Department, TechZone360 adds.

But it may not be that easy. Rob Enderle, an analyst at Enderle Group, said the proposed deal still raises some concerns.

"The problem for AT&T is that the acquisition would make the company so large that the only reasonable way Verizon and Sprint could compete would be to merge themselves, which clearly would be something that is not in the public's best interest," Enderle was quoted by NewsFactor.com. "It's hard to deny one merger if you accept the other. There are so few competitors in this space that collapsing the largest and the smallest together creates a problem for the two in the middle."

Not everyone is optimistic over whether the deal will get a blessing from regulators. “There is only a slim probability that the deal will be approved,” according to a report from The International Business Times.

"We see little near term fallout from AT&T and T-Mobile's withdrawal of their FCC application to transfer spectrum. Based on the delays caused by the need to reapply to the FCC in the unlikely case that courts rule in favor of AT&T and T-Mobile, the merger will not happen," Gerard Hallaren, an analyst with Janco Partners, said in a recent note to clients that was quoted by the International Business Times.

In addition, AT&T has to pay a $4 billion penalty to Deutsche Telekom if the deal fails. In fact, news reports say AT&T already set aside the $4 billion, according to TechZone360.

But the two companies are doing anything but throwing in the towel.

It appears that there is an effort to make T-Mobile a less dominant company – thus cutting down the competitive impact of the first deal. CBS News noted how The New York Times reported recently that, "AT&T has been secretly working on an audacious 11th-hour deal to salvage the transaction: AT&T is knee-deep in talks with Leap Wireless, a second-tier but growing wireless player, to sell it a big piece of T-Mobile's customer accounts and some of its wireless spectrum, according to people involved in the negotiations."

Earlier this year, Justice Department officials filed a lawsuit to block the $39 billion merger. Regulators are concerned about antitrust issues and whether consumers would be hurt if the companies were to merge into one.

"The proposed $39 billion transaction would substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services in their everyday lives," the Justice Department claims. AT&T disagrees.


Ed Silverstein is a TechZone360 contributor. To read more of his articles, please visit his columnist page.

Edited by Jamie Epstein

TechZone360 Contributor

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