AT&T Bid for T-Mobile Should Be Rejected, Sprint Tells FCC

Sprint Nextel Corp. (S) asked regulators to deny AT&T Inc. (T)’s proposed purchase of T-Mobile USA Inc., saying the $39 billion deal would decrease competition and raise consumer prices.

“AT&T’s takeover of T-Mobile must be blocked,” Sprint, the third-largest wireless carrier, said in comments filed today at the Federal Communications Commission. The agency and the Justice Department are vetting the transaction announced March 20 that would boost AT&T to become the largest U.S. wireless carrier, ahead of Verizon Wireless.

A deal supporter, the Communications Workers of America, told the FCC in a filing today the transaction will create as many as 96,000 jobs and accelerate deployment of high-speed wireless Internet service.

Opponents and proponents are submitting the comments to influence the FCC, which is composed of presidential appointees and has a Democratic majority led by Chairman Julius Genachowski.

“I am not sure a No. 3 player painting a doom and gloom scenario is necessarily going to sway the Department of Justice and FCC,” Christopher King, a Stifel Nicolaus & Co. analyst in Baltimore, said in an interview. King said the merger has a two- thirds chance of passing, with regulators likely demanding the combined company sell assets such as airwave licenses.

Regulatory Review

The FCC is to examine whether the deal meets a broad standard of being in the public interest. The Justice Department in its separate, concurrent review asks whether the deal may harm competition. AT&T executives have said the agencies’ review will take about a year.

AT&T’s competitors “are confusing the public interest with their own particular corporate interest,” Jim Cicconi, AT&T senior executive vice president, said in a statement distributed by e-mail today. Unions with a total membership of more than 15 million workers have filed in support of the deal, as have 14 governors, Cicconi said.

AT&T in an April 21 filing said its purchase of the Deutsche Telekom AG (DTE) unit would add airwaves to help it handle growing mobile Internet use through smartphones and other devices such as Apple Inc. (AAPL)’s iPhone and iPad.

AT&T Chief Executive Officer Randall Stephenson on May 11 told U.S. senators the deal would result in fewer dropped calls and faster, more reliable Internet connections.

AT&T has failed to improve its network, Sprint told the FCC. “If AT&T has capacity constraints, they are the result of its failure to upgrade and invest in its network,” Sprint said in its filing today.

Raise Rates

The merger “would turn back the clock on competition and innovation,” Sprint said in its filing. AT&T and Verizon together would have 76 percent of all wireless subscribers, leaving telephone handset makers “less willing to partner with any providers,” Sprint said.

AT&T and Verizon could more easily raise rates for other companies to send calls over their towers, and charge more to route calls from towers to other places in the phone network, Sprint said.

The merger would “destroy tens of thousands of jobs,” the Washington-based public advocacy group Free Press said in comments to the FCC.

“Eliminating a significant competitor from the wireless market obviously harms competition,” Free Press President Craig Aaron said in a statement. “Moreover, the two companies do not need to merge to achieve the capacity or build-out gains they claim.”

Create a Duopoly

A group of opponents including Consumers Union and Washington-based Media Access Project said they would tell the FCC the deal would create a duopoly of two large carriers and “enable AT&T to stifle innovation, increase prices, and decrease choices for wireless customers.”

“AT&T and Verizon are the two nationwide carriers that increasingly dominate the market for mobile wireless services,” the group including Consumers Union said in an e-mail. AT&T’s “claimed efficiencies” are “speculative, overstated or inaccurate,” the group said.

Leap Wireless International Inc. (LEAP), which lets customers purchase calling plans one month at a time, intended to file in opposition to the proposed merger, Greg Lund, a spokesman for the San Diego-based carrier, said in an e-mail.

Leap in a May 24 statement said the merger would “accelerate the trend of alarming concentration of wireless providers.”

Another pay-as-you-go carrier, MetroPCS Communications Inc. (PCS), on May 17 said the deal risks putting too much spectrum into the hands of one carrier.

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net; Greg Bensinger in New York at gbensinger1@bloomberg.net

To contact the editors responsible for this story: Allan Holmes at aholmes25@bloomberg.net; Peter Elstrom at pelstrom@bloomberg.net

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