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Is the AT&T merger with T-Mobile USA dead?

Questions raised by FCC's push for another legal review

November 23, 2011 12:47 PM ET

Computerworld - Given the U.S. Federal Communications Commission (FCC) staff opposition to the proposed AT&T merger with T-Mobile USA, it's fair to ask: Is the $39 billion deal dead? And if that's true, what happens to T-Mobile? Or to AT&T, which could face a multi-billion dollar penalty payment to T-Mobile if it walks away from the deal.

What just happened? A draft FCC order released Tuesday found the merger to be anticompetitive and contrary to the public interest. That's much the same view as the U.S. Department of Justice, which filed a lawsuit in federal court in August to block the merger.

It's likely that the critical FCC draft order will be approved (possibly in December) by the full Commission, which is made up of three Democrats and one Republican. That would push the matter before an administrative law judge for a full hearing.

If that happens, AT&T and T-Mobile would face at least two legal hurdles: the administrative law judge's review and the Department of Justice (DOJ) case in U.S. District Court for the District of Columbia. The federal court hearing is set for February, which would likely happen before the administrative law judge review.

What's the initial reaction? AT&T said it was disappointed with the FCC position and is "reviewing all options."

The Communications Workers of America union, which backs the merger, called the FCC's move a "job killer at a time of 9% unemployment."

Sprint, the third largest carrier, has consistently opposed the merger saying it would set up AT&T with T-Mobile and Verizon Wireless as a "duopoly" in control of U.S. wireless. A Sprint official reacted yesterday by quoting from FCC Chairman Julius Genachowski in August when he said there were "serious concerns about the impact of the proposed transaction on competition."

That Sprint official, Vonya McCann, Sprint's senior vice president of government affairs, added: "We appreciate Chairman Genachowski's leadership on this issue...." Genachowski was responsible for circulating yesterday's draft order of the FCC staff to the full commission.

What about reactions from uninvolved parties? Given the doubling of legal hurdles the merger faces, some analysts and experts think AT&T could walk away from the merger. But that would expose AT&T to a "walk-away" fee of potentially $6 billion in cash and spectrum rights it would be required to pay to T-Mobile under terms of its merger proposal.

"That's a big walk-away fee," said Maurice Stucke, an associate professor at the University of Tennessee College of Law and a former DOJ attorney. "Unless AT&T can reach some agreement with T-Mobile [on the walk-away terms] I don't see where AT&T can go with this."



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