AT&T-T-Mobile USA Merger Foes Welcome Failure of Derided Takeover Deal

Opponents of AT&T Inc. (T)’s proposed $39 billion acquisition of T-Mobile USA (DTE) cheered news that the deal was scrapped.

AT&T said yesterday that it’s abandoning the plan after failing to convince the U.S. Justice Department that creating the largest U.S. wireless carrier wouldn’t hamper competition.

Foes began lining up against the proposal from the time it was unveiled in March. Rivals, legislators and consumer advocates said the combination would harm consumers and stifle innovation. Sprint Nextel Corp. Chief Executive Officer Dan Hesse was among the most vocal, shuttling regularly from his company’s headquarters in Overland Park, Kansas, to Washington, to lobby lawmakers and testify in Congress.

“From the beginning, Sprint has stood with consumers who spoke loudly and clearly that AT&T’s proposed takeover of T- Mobile would create an undeniable duopoly that would have resulted in higher prices, less innovation and fewer choices for the American consumer,” Vonya McCann, a senior vice president at Sprint Nextel, said in a statement yesterday.

Sprint Nextel gained 6.5 percent to $2.30 in late trading yesterday after the announcement.

Sprint sued to block the deal in September, days after the Justice Department filed an antitrust lawsuit against the proposal.

“Consumers won today,” Sharis Pozen, acting assistant attorney general for the Justice Department’s antitrust division, said in a statement.

‘Teetering’ Industry

“Had AT&T acquired T-Mobile, consumers in the wireless marketplace would have faced higher prices and reduced innovation,” she continued. “We sued to protect consumers who rely on competition in this important industry. With the parties’ abandonment, we achieved that result.”

Carriers in less populated regions of the U.S. said they would have been especially vulnerable to anticompetitive behavior by an enlarged AT&T. The Rural Cellular Association, which represents smaller service providers, filed a letter in May with the U.S. Federal Communications Commission, saying that the wireless industry is “teetering on the brink of true duopoly” that could hurt smaller companies.

“I am pleased that AT&T dropped its bid to acquire T- Mobile, but competitive concerns still remain,” Steven Berry, Chief Executive of the Rural Cellular Association, said in a statement. “The FCC must ensure a wireless ecosystem that is fueled by competitive policies.”

Higher Prices Averted

The FCC wants a competitive market that drives innovation and creates jobs, Julius Genachowski, the agency’s (S) chairman, said yesterday in an e-mailed statement.

“This deal would have done the opposite,” Genachowski said.

Consumer advocates opposed the deal as well, arguing that the combination would result in higher prices. T-Mobile’s plans typically cost $15 to $50 per month less than comparable plans from AT&T, according to Consumers Union. That disparity would have vanished had the merger gone through, the group has said.

“Regulators clearly saw through AT&T’s claims of better service and saw what we saw -- a combined AT&T/T-Mobile would mean higher prices and fewer choices for consumers,” Parul P. Desai, policy counsel for Consumers Union, said in yesterday’s statement. “It’s an early holiday present for consumers.”

Consumer groups demanded in June that the FCC hold public hearings outside of Washington to hear citizens’ concerns. The FCC faced heavy lobbying from proponents of the deal.

Lobbying Pressure

“In this age of cynicism, it is important for the American people to see that Washington does not always go to the highest bidder,” Harold Feld, legal director of Public Knowledge, one of the groups that pushed for the hearings, said in an e-mailed statement. “The Department of Justice and the Federal Communications Commission stood up to tremendous lobbying pressure as AT&T spent tens of millions of dollars trying to push this merger through.”

Another consumer advocate, Media Access Project, said that the merger could lead to job losses and store closures.

“Today’s announcement proves that law trumps politics,” Andrew Jay Schwartzman, Policy director for Media Access, said in a Dec. 19 statement. “This anti-competitive transaction clearly exceeded permissible standards.”

Lawmakers in Washington lined up on both sides of the deal. In September, some 100 Republican congressmen and 15 Democratic lawmakers said the Justice Department should let the merger proceed. Opponents included Senator Herb Kohl, head of a Judiciary antitrust subcommittee, who argued against the deal in a July letter to Attorney General Eric Holder and the FCC’s Genachowski.

‘Good Riddance’

“Had this merger gone through it would’ve been a bad deal for consumers, resulting in higher cell phone bills for Minnesotans, greatly reduced competition, the potential loss of thousands of jobs, and less innovation in technology,” Senator Al Franken, a Democrat from Minnesota, said in a statement yesterday. “Wireless telecommunication plays a central role in the 21st century American economy, and I’m relieved that we are no longer at risk of concentrating such enormous power in the hands of AT&T and Verizon. (VZ)

Amid the heavy opposition and signs of regulators’ displeasure, speculation mounted in recent months that the deal would collapse.

“This deal has been as good as dead for months because the facts never matched AT&T’s fabrications about the benefits of the merger,” Craig Aaron, president of nonprofit Free Press, said in a statement. “As the public, the Justice Department and the FCC long ago recognized -- and now even AT&T must admit -- this deal would have only meant higher prices, fewer choices and tens of thousands of lost American jobs. Good riddance.”

To contact the reporter on this story: Olga Kharif in Portland at okharif@bloomberg.net

To contact the editor responsible for this story: Tom Giles at Tgiles5@bloomberg.net

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