AT&T Says FCC Misinterprets Market Analysis on T-Mobile Bid

AT&T Inc. (T) said the Federal Communications Commission misinterprets market analysis and “cherry-picks facts” in concluding that the company’s bid for T-Mobile USA Inc. fails to serve the public interest.

The agency erroneously determined in a Nov. 29 report that the $39 billion purchase of T-Mobile would cause significant job losses and that AT&T would probably build high-speed wireless Internet connections without the merger, Jim Cicconi, AT&T’s senior executive vice president-external and legislative affairs, said in a statement today.

“The report raises questions as to whether its authors were predisposed,” Cicconi said. “The document is so obviously one-sided that any fair-minded person reading it is left with the clear impression that it is an advocacy piece and not a considered analysis.”

The FCC let Dallas-based AT&T on Nov. 29 rescind its application to buy T-Mobile, a deal to join the second-and fourth-largest U.S. wireless carriers. The Justice Department sued in August to block the merger as anti-competitive, and a court date is set for February. The FCC moved last week to send the deal to a hearing that would have taken much of next year, an outcome the application withdrawal avoided.

Photographer: Andrew Harrer/Bloomberg

Randall Stephenson, chairman and chief executive officer of AT&T Inc., speaks at a Senate Judiciary Committee hearing on the AT&T/T-Mobile merger in Washington, D.C., U.S. Close

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Photographer: Andrew Harrer/Bloomberg

Randall Stephenson, chairman and chief executive officer of AT&T Inc., speaks at a Senate Judiciary Committee hearing on the AT&T/T-Mobile merger in Washington, D.C., U.S.

AT&T’s response “represents a very visceral reaction to the release of the FCC report,” Jeff Silva, senior policy director for telecommunications, media and technology at Medley Global Advisors LLC in Washington, said in an interview. “The trial is perhaps their last best chance to salvage the transaction, and the release of the report is potentially damaging to that objective of winning at trial.”

‘Massive Job Losses’

The FCC said in its report that “the applicants have failed to meet their burden of demonstrating that the competitive harms that would result from the proposed transaction are outweighed by the claimed benefits.” T-Mobile offers low prices and innovation, and its potential loss as a competitive force causes “serious concern,” the FCC found.

Neil Grace, an FCC spokesman, said today in an e-mail that “the FCC’s expert staff dispassionately analyzed all of the facts, including the arguments AT&T rehashes today.” The agency concluded that “the transaction would decrease competition, innovation and investment and harm consumers,” Grace said, adding that “AT&T’s own filings, many of which they have kept confidential, show that the deal would lead to massive job losses.”

Cicconi said that the agency’s analysis of the deal’s effect on competition “willfully ignores critical facts about the wireless market.” The FCC report cites Bellevue, Washington-based T-Mobile as a “disruptive force” in the wireless industry, yet fails to mention that “for the past two years T-Mobile has been losing customers despite growing demand across the industry,” he said.

‘Makes No Sense’

AT&T also challenged the agency’s conclusion that the deal would eliminate jobs, pointing to the FCC’s plans for a $4.5 billion fund to support high-speed Internet expansion aimed at spurring employment growth.

“This notion -- that government spending on broadband deployment creates jobs and economic growth, but private investment does not -- makes no sense,” Cicconi said. The company has said in ads aired on Washington-area television stations that the deal would create as many as 96,000 jobs.

AT&T fell 0.1 percent to $28.84 at 4 p.m. in New York Stock Exchange composite trading.

‘Fairly Serious Hit’

FCC Chairman Julius Genachowski said in a Nov. 29 statement that “our review of this merger has had a clear focus: fostering a competitive market that drives innovation, promotes investment, encourages job creation and protects consumers.”

AT&T and T-Mobile parent Deutsche Telekom AG (DTE) plan to focus on objections from antitrust authorities and to return to the FCC at some point, AT&T said in a statement last week.

“That was a fairly serious hit that AT&T took at the FCC, but their response today makes it clear that the battle definitely isn’t over,” Paul Gallant, an analyst with Guggenheim Securities LLC, said in an interview. “A settlement with the Justice Department isn’t likely but the company still has a decent chance in court.”

To contact the reporters on this story: Eric Engleman in Washington at eengleman1@bloomberg.net; Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net

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