AT&T, T-Mobile Acquisition to Undergo Court Hearing - FCC

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The Federal Communications Commission has earlier expressed its concerns over AT&T’s proposed acquisition of rival telecommunications provider T-Mobile from its parent company. In recent developments, the FCC is reportedly seeking that the deal be scrutinized by administrative law courts.

AT&T’s proposed $39 billion acquisition deal might encounter further delays, as the FCC has already made steps that will help it decide whether to approve the merger or not. The acquisition will make the combined company the biggest mobile carrier in the U.S., and it is feared to be too big for competition.

In a conference call with the media, an FCC official said that Chairman Julius Genachowski is asking the oversight agency’s commissioners to push for a court hearing, after deciding that the deal will “significantly diminish competition” in the industry.

The FCC says this is one of the three options that it can undertake when deciding on major mergers and acquisitions. They can either approve, approve with conditions, or — as in this case — recommend a court hearing before making a final decision. The FCC is not alone in questioning the AT&T and T-Mobile merger, as the Department of Justice has already filed an anti-trust lawsuit against the AT&T and T-Mobile deal in August.

AT&T holds to its claim that their acquisition of T-Mobile from Deutsche Telekom will help improve innovation, given that the deal will give them easier access to T-Mobile’s broadband spectrum and capacity. Likewise, AT&T has criticized the FCC’s plan to go to court, saying that “[i]t is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs.”

However, the FCC is doubtful if the deal will encourage innovation and create jobs. In fact, an FCC official says the deal is likely to “lead to massive job losses.”

Consumers’ and other entities’ take on the matter is mixed, with some favoring the deal, while other stakeholders criticizing it heavily. The FCC’s motion for a formal request for administrative hearing will let the courts look into both sides’ evidence. The DoJ’s earlier antitrust lawsuit will only need to prove that the deal will substantially lessen competition. Meanwhile, the FCC will need to show that the deal will be against public interest — two different, but related things.

What’s clear at this point is that it will be a bumpy road ahead especially for AT&T, which stands to lose money if the deal doesn’t push through, having a contractual obligation to pay up to $6 billion to T-Mobile if, for any reason, the acquisition falls through.