July 20 (Bloomberg) -- Concerns are building among members of the U.S. Congress over AT&T Inc.’s proposed $39 billion purchase of T-Mobile USA Inc., as a Democratic senator urged the government to block the deal and three other lawmakers criticized it.
Senator Herb Kohl, head of a Judiciary antitrust subcommittee, said in a letter to Attorney General Eric Holder and Federal Communications Chairman Julius Genachowski the purchase would further consolidate an “already highly concentrated market.”
In a separate letter to Holder and Genachowski, Democratic Representatives Edward Markey of Massachusetts, John Conyers of Michigan and Anna Eshoo of California said the deal “raises serious questions regarding the future competitiveness of the wireless industry.”
The FCC and the Justice Department are vetting the deal in a review that AT&T executives have said will take about a year. If completed, the merger, which was proposed March 20, would combine the second- and fourth-largest carriers to create a new market leader, surpassing Verizon Wireless. Members of Congress don’t have a formal role in the approval process.
Kohl’s letter may give deal opponents some hope in the face of AT&T’s lobbying efforts, said Rebecca Arbogast, an analyst in Washington with Stifel Nicolaus & Co. His opposition “is of some significance,” she said in a report today. He “could be something of a barometer for mainstream Democratic antitrust thinking” and “could help embolden critics at the DOJ and FCC.”
Some members of Congress are indicating support for the deal.
“The merger has the potential to provide significant network efficiencies that may help alleviate capacity constraints” and expand use of a faster wireless technology known as LTE,” Senator Mike Lee of Utah, the senior Republican on the antitrust panel, said in a statement today.
In a June 24 letter to Holder and Genachowski, 76 Democratic House members said they supported AT&T’s pledge, if the deal goes through, to build a state-of-the-art wireless network that covers 97 percent of Americans. Such a commitment would create jobs to help provide millions of Americans with wireless services, the lawmakers said in the letter.
In his letter, Kohl of Wisconsin said that the two companies’ defenses of the deal “are without merit in my view.”
He said the acquisition of Bellevue, Washington-based T-Mobile from Deutsche Telekom AG should be evaluated on a national basis rather than a local market-by-market analysis, as Dallas-based AT&T has urged.
The companies’ arguments that the deal will improve the service of customers of AT&T and T-Mobile aren’t “convincing to justify such a clearly anti-competitive acquisition,” Kohl wrote.
In testimony before Kohl’s subcommittee on May 11, AT&T Chief Executive Officer Randall Stephenson said the deal would result in fewer dropped calls and faster, more reliable Internet connections.
AT&T spokesman Michael Balmoris said in an e-mail that Kohl’s view “is inconsistent with the antitrust law, is shared by few others and ignores the many positive benefits and numerous supporters of the transaction. We continue to believe those reviews will result in approval of this transaction.”
The transaction requires a majority at the FCC, which has three Democrats and one Republican, to be approved. The Justice Department would have to sue in court to halt the deal.
‘Careful, Comprehensive’ Review
Neil Grace, an FCC spokesman, didn’t immediately respond to a request for comment. Justice Department spokeswoman Gina Talamona declined to comment about the lawmakers’ letters. “The investigation is continuing,” she said in an interview.
In their letter, Markey, Conyers and Eshoo pressed the government to do a “careful, comprehensive and expeditious review.” Conyers is the ranking Democrat on the House Judiciary Committee; Eshoo and Markey are the top two Democrats on the House Energy and Commerce subcommittee on communications and technology.
The lawmakers said they thought the deal would reverse some of the gains the government has made in injecting competition into the telecommunications industry.
The planned acquisition “would be a troubling backward step in federal public policy,” the lawmakers wrote, calling it “a retrenchment from nearly two decades of promoting competition and open markets to acceptance of a duopoly in the wireless marketplace.”
Sprint as Buyer?
Sprint Nextel Corp. and the Rural Cellular Association, opponents of the proposed acquisition, praised Kohl.
Kohl understands the T-Mobile purchase is “a bad deal for consumers, competition and our nation’s economy,” said Vonya McCann, Sprint’s senior vice president for government affairs, in a statement.
The Communication Workers of America, which supports the deal, said in a statement that Sprint, the other possible buyer for T-Mobile, “would be a disaster for workers and consumers.”
That’s in part because Overland Park, Kansas-based Sprint farms out work to foreigners and hasn’t finished integrating Nextel, which it bought in 2005, into its business, the CWA said.