AT&T and T-Mobile are the latest wireless companies to join forces in a $39 billion deal that both companies say will help them better utilize available spectrum and more quickly deploy a 4G LTE network. But can previous wireless mergers tell us anything about what to expect from the AT&T-T-Mobile approval process?
In a Monday conference call about the deal, AT&T stressed several times that it has "done this before," and is therefore well-suited to handle a merger of this magnitude. In 2004, Cingular Wireless purchased AT&T Wireless for $41 billion. It closed later that year, and the combined company started transitioning the Cingular brand to AT&T in January 2007.
"We've done it before and we've proven that we can deliver," Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets, said Monday.
In approving the Cingular-AT&T merger, the FCC concluded that "the acquisition generally is not likely to cause competitive harm in most mobile telephony markets." It did, however, find that the deal might prove anti-competitive in 22 of the country's 734 cellular markets. The two companies were, therefore, banned from merging their mobile phone businesses in 16 markets - including Oklahoma City and smaller communities in Arkansas, Texas, and elsewhere. They also had to give up 10 MHz of spectrum in Detroit and Dallas, so that there would be enough spectrum for other companies to effectively compete.
The FCC required similar conditions when Verizon Wireless bought Alltel in 2008. The Department of Justice required Verizon to rid itself of 100 markets, while the FCC demanded that Verizon divest itself of another five to alleviate competitive concerns.
AT&T ended up buying the bulk of the Alltel Wireless assets that were divested by Verizon for $2.35 billion, selling some Centennial Communications Corp assets to Verizon for $240 million.
At the time, Democratic FCC Commissioners Michael Copps and Jonathan Adelstein expressed concern that a combined Verizon-Alltel would hurt small carriers that rely on roaming deals. "This development may put some small carriers out of business," Copps said.
Adelstein said he was "deeply concerned about consolidation in the wireless marketplace."
When asked if AT&T believed it would have to give up certain markets like Verizon had to with Alltel, AT&T chairman, CEO, and president Randall Stephenson said Monday that "our starting expectation is that no divestitures should be required, but we'll have to go through the process."
Another major merger of the past decade was Sprint's $35 billion purchase of Nextel in December 2004 - bringing the number of wireless carriers from five to four. The FCC approved it in August 2005, finding that "the post-merger market environment, there will be a continued presence of several other carriers with the ability to add subscribers and act as effective competitive constraints on the behavior of the merged entity."
Last year, Sprint said it will pull the plug on the once much beloved, but now essentially zombified Nextel iDEN network in 2017 as part of a complete overhaul of the carrier's many networks.
The FCC has not yet commented on the AT&T-T-Mobile deal, but in 2009, it kicked off a far-reaching examination of the wireless industry, asking stakeholders to submit comments on innovation and investment, the state of competition, and whether or not consumers get enough information from providers to make informed decisions about service.
Stephenson said Monday, however, that it believes the government will examine the deal on a market-by-market basis rather than the industry as a whole, and it is there that AT&T can demonstrate an "enormous" amount of competition in the wireless space.
"We'll certainly be open to having conversations and addressing concerns as they might come up," he said.
The Senate Judiciary subcommittee on antitrust, competition policy and consumer rights on Sunday promised to take a "close look" at the merger. On Monday, Rep. Edward Markey, who sits on the House Energy and Commerce technology subcommittee, promised to "evaluate the proposed merger of AT&T and T Mobile closely with a focus on how it would impact consumers, competition, and choice" and hold hearings on the matter.