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AT&T’s T-Mobile Bid May Raise Wireless Prices, Lawmakers Say

AT&T CEO Before Congress
Randall Stephenson, chairman and chief executive officer of AT&T Inc., left, speaks during a House Judiciary Committee hearing on telecommunications competition with Rene Obermann, chief executive officer of Deutsche Telekom AG, center, and Steven Berry, president and chief executive officer of the Rural Cellular Association. Photographer: Andrew Harrer/Bloomberg

May 26 (Bloomberg) -- U.S. House lawmakers said they are concerned that AT&T Inc.’s planned purchase of T-Mobile USA Inc. may thwart competition and raise prices for wireless users.

The $39 billion deal would result in more consolidation “than any previous merger” in the wireless communications market, said Representative Bob Goodlatte, a Virginia Republican who heads a Judiciary subcommittee on business competition. He expressed concern the combination would let AT&T charge smaller competitors more money to use the company’s mobile network, a process known as roaming.

“There are legitimate questions about whether this merger could move the wireless market past the anticompetitive tipping point,” Goodlatte said today at a hearing in Washington before his panel on competition and the Internet.

At a hearing May 11, senators said they have similar worries. Yesterday, Representative Ed Markey, a Massachusetts Democrat, and Representative John Conyers, a Michigan Democrat, said the transaction would hurt consumers and may result in job losses.

“I see no redeeming reason” for federal regulators to approve the transaction, Conyers said today. “Not even one.”

AT&T Chief Executive Officer Randall Stephenson and Rene Obermann, chief executive officer of Deutsche Telekom AG, T-Mobile’s parent company, told the House panel the deal would result in better service through increased wireless capacity.

“The transaction will mean significant benefits,” Obermann said.

Combining Forces

The deal announced March 20 for the Deutsche Telekom unit would combine the second- and fourth-largest carriers to create a new market leader, ahead of No. 1 Verizon Wireless and third-largest Sprint Nextel Corp.

The transaction requires approval from the Justice Department and the Federal Communications Commission. Congress doesn’t play a direct role in merger reviews.

Stephenson said he has “an expectation” the Justice Department may require his company to sell airwave holdings in “certain markets” where regulators judge concentration is excessive as a requirement for clearing the deal. He didn’t offer specifics.

Some lawmakers said they are concerned the acquisition would lead to more unemployment.

The word “synergies” often is a “euphemism for massive job losses,” said Representative Mel Watt, a North Carolina Democrat.

‘Redundancies’

While AT&T expects to hire people to help build an advanced wireless network reaching rural areas, Stephenson said, there would be “redundancies” leading to cutbacks. “We will not need two finance organizations, for example,” he said. “We will not need two marketing organizations.”

Rural carriers and some consumer advocates have asked federal authorities to block the transaction.

Steven Berry, who represents small competitors as president of the Rural Cellular Association, said the planned purchase will “deal a mortal blow to competition and cause significant harm to consumers” through higher prices and lower quality service.

Representative Ted Poe, a Republican, said people in his Texas district worry that Leap Wireless International Inc.’s Cricket pay-as-you-go service is “going to go out of business with this merger.”

Leap said in a May 24 statement that it opposes the merger. Cricket had 5.8 million customers in the first quarter this year, and AT&T had 98 million, according to Bloomberg data.

‘Out of Business’

“You going to put them out of business Mr. Stephenson? I think you are. I think you’re going to put them out of business,” Poe said.

“There’s no indication of that yet,” Stephenson said. He said Leap is among companies that “have done I believe a very masterful job of penetrating the lower end of the marketplace.”

San Diego, California-based Leap lets customers purchase calling a month at a time. Traditional mobile-phone agreements require subscribers to sign long-term contracts.

Stephenson said the deal would let the combined company get more capacity from existing spectrum than AT&T and T-Mobile would have operating separately.

“AT&T and its partners can continue to develop, introduce and aggressively promote innovative, but capacity-consuming, services, devices and applications,” Stephenson said.

The deal “would amass an unprecedented amount of spectrum in a single carrier’s hands,” according to Berry, whose group is based in Washington. “The deal would further consolidate an industry already teetering on the brink of duopoly,” he said.

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

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

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