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AT&T’s T-Mobile Deal May Hurt Competition, Senators Say

U.S. senators said they are concerned that AT&T Inc. (T)’s proposed $39 billion purchase of T-Mobile USA Inc. will harm competition by further consolidating the nation’s wireless phone-carrier market.

Democrat Herb Kohl of Wisconsin set the tone for a hearing in Washington of a Senate Judiciary antitrust subcommittee that he heads by saying the deal has “profound implications.” Prices may rise if the acquisition is approved by federal regulators, he said, putting the phone-carrier market “in danger of reverting to a duopoly in this century.”

The deal, announced March 20, would combine the second- and fourth-largest carriers to create a new market leader ahead of No. 1 Verizon Wireless and No. 3 Sprint Nextel Corp. (S) While Republican and Democratic lawmakers expressed reservations about the consolidation, it will be the Justice Department and Federal Communications Commission that will decide whether the merger is completed.

AT&T and T-Mobile executives testified that the combination will speed up Internet service and result in fewer dropped calls, a necessary improvement as video and handheld tablet computers increase wireless traffic.

The transaction “will benefit consumers in many ways,” AT&T Chief Executive Officer Randall Stephenson said.

‘About a Year’

AT&T expects a decision from regulatory agencies will take “about a year,” Stephenson told reporters after the hearing.

“If we look at this on facts -- what are the facts and what does the data tell us about this particular transaction -- we feel confident this transaction will be approved,” he said. Asked if he expected regulators to require the combined company to sell assets, Stephenson said, “There will be some concessions, of course.”

“We’ve done a number of these transactions, large and small. In each transaction there have been concessions, where we’ve agreed to divest certain assets,” Stephenson said. “And so I have no doubt that this will have similar requirements on it.”

During the hearing, Kohl said it was “undoubtable” that the government would require AT&T to meet conditions in order to approve the deal.

Kohl questioned the assertion by AT&T that T-Mobile wasn’t one of its biggest competitors.

“How can you say T-Mobile isn’t a close competitor,” the senator said.

Wireless Technology

Without the merger, T-Mobile couldn’t afford to upgrade to faster wireless technology known as LTE, said Philipp Humm, president and chief executive officer of T-Mobile USA.

“T-Mobile’s parent, Deutsche Telekom, is not in a position to finance the necessary large-scale investments in the U.S. for T-Mobile to remain competitive,” Humm said. “The combination with AT&T allows T-Mobile to address these challenges.”

Senator Mike Lee of Utah, the panel’s ranking Republican, said he generally opposes government interference in business decisions. Still, “I share some of the concerns” of Kohl, he said.

“I fear that, if approved, the merger would take us one more step, just one step away, from the monopoly market that we had under Ma Bell,” said Senator Al Franken, a Minnesota Democrat. He was referring to the AT&T empire that was broken up by U.S. District Judge Harold Greene in 1984 in an antitrust case brought by the Justice Department.

AT&T Powerhouse

Allowing the deal to go forward wouldn’t recreate the powerhouse AT&T was in the 1980s when there was little innovation in the industry, said Senator John Cornyn, a Texas Republican.

“I don’t think there’s any danger of doing that,” he said.

Today’s hearing is entitled, “The AT&T/T-Mobile Merger: Is Humpty Dumpty Being Put Back Together Again?”

Sprint Chief Executive Officer Dan Hesse testified the acquisition would put his company in a position to be acquired.

The government’s review of the combination will test the strength of antitrust enforcement, said Gigi Sohn, president of Public Knowledge, a Washington-based advocacy group. “This merger is unfixable” and should be challenged in court, she said.

Opposition to the acquisition is increasing, Ed Black, president of the Computer & Communications Industry Association, said in a conference call yesterday. Members of the Washington- based trade group include Sprint, Google Inc. (GOOG), EBay Inc. (EBAY) and Yahoo! Inc.

Faster Services

If the government requires AT&T to deliver on its promise to expand faster wireless services, the acquisition would help the U.S. compete against other countries that are upgrading their networks, said Larry Cohen, president of the Communications Workers of America.

“This merger represents an opportunity for this country to accelerate high-speed broadband deployment,” he said, and rural communities, in particular, may benefit.

The need for faster wireless services is forcing the industry to consolidate, he said. “The real story here is whether Sprint or AT&T acquires the company,” Cohen said.

The planned acquisition also has the support of the International Brotherhood of Teamsters and the AFL-CIO, Stephenson said.

To contact the reporters on this story: Jeff Bliss in Washington at jbliss@bloomberg.net; Todd Shields in Washington at tshields3@bloomberg.net;

To contact the editors responsible for this story: Mark Silva at msilva34@bloomberg.net; Allan Holmes at aholmes25@bloomberg.net;

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