AT&T CEO Complains That Regulatory Logjam Stymies Deals

AT&T Inc. (T) Chief Executive Officer Randall Stephenson said Washington needs to figure out how to clear a regulatory logjam that’s hampering wireless growth and forcing companies to raise prices.

The industry is waiting for the Federal Communications Commission to decide on Verizon Wireless’s proposed $3.6 billion partnership with cable companies, including Comcast Corp. (CMCSA) The review of that agreement, announced in December, is holding up related deals for spectrum by AT&T and others, Stephenson said.

The popularity of the iPhone and other smartphones is putting pressure on existing networks, prompting wireless carriers to seek more capacity in crowded markets. The FCC has to sign off on each transaction, and its rate of decision making can’t keep pace with the industry’s evolving needs, he said.

“The industry is just kind of stuck and we’re all sitting here watching Verizon-Comcast waiting to see what happens,” Stephenson said yesterday in an interview at Bloomberg headquarters in New York. “You have got to make sure we put spectrum in the market. They need to become liquid spectrum markets.”

AT&T, based in Dallas, says it faces a shortage of spectrum -- the airwaves that let mobile devices make calls and download data. Ever since its $39 billion takeover of T-Mobile USA Inc. was shot down by regulators in December, Stephenson has warned that the constraints on airwave expansion will cause higher prices. When spectrum is tight, the only recourse carriers have is to charge more, degrade quality or throttle service, he said.

No Delay?

FCC Chairman Julius Genachowski fired back at AT&T this week, saying that the failure of the T-Mobile deal didn’t create an industry shortage on its own. There hasn’t been a holdup in the regulatory process, he said.

“We have approved hundreds of wireless transactions involving approximately 1,000 spectrum licenses, some involving licenses valued at billions of dollars,” Genachowski said in a speech at the CTIA International Wireless show this week.

AT&T won approval from federal regulators for a $1.93 billion purchase of Qualcomm Inc. (QCOM) airwaves in December, three days after dropping its plan to buy T-Mobile USA.

Neil Grace, a spokesman for the FCC, declined to comment yesterday.

Leap Talks

In February, the Wall Street Journal reported that AT&T was in takeover talks with Leap Wireless International Inc. (LEAP), a pay- as-you-go carrier in San Diego. A Reuters report reiterated yesterday that AT&T had held discussions with Leap in recent months, boosting Leap’s shares 7.8 percent today.

Gregory Miller, an analyst with Collins Stewart LLC, said in February that there was little chance of AT&T buying Leap.

AT&T shares rose 1.4 percent to $33.59 at the close in New York. The stock has climbed 11 percent this year.

AT&T, the second-largest U.S. wireless-service provider, says that the industry would push ahead with more spectrum purchases if the government weighed in on Verizon (VZ)’s agreement with cable companies. That deal would let Verizon, the No. 1 U.S. carrier, buy a major swath of unused spectrum from a group led by Comcast.

Companies should be able to buy and sell spectrum more freely, letting them better satisfy regional demand, Stephenson said. A carrier in one city may have low market share and more than enough spectrum, while another company has lots of customers and inadequate airwaves to serve them. The government approval process doesn’t let the industry make deals quickly enough to meet customers’ needs, AT&T argues.

Fostering Competition

For its part, the FCC is trying to balance the allocation of spectrum so that customers always have several service providers to choose from. The intent is to keep prices down by ensuring competition.

Stephenson said that distributing spectrum among competitors who can’t use it efficiently doesn’t help. The government either has to let companies pool their spectrum or risk pushing underperforming companies out of business, he said.

“The industry is going to consolidate whether you like it or not,” he said. “If you don’t allow consolidation, some companies will go away.”

To contact the reporters on this story: Scott Moritz in New York at smoritz6@bloomberg.net; Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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