AT&T readies for battle with government over proposed T-Mobile USA deal

When AT&T said earlier in the year it hoped to acquire rival T-Mobile USA, many analysts said the regulatory process would be long and arduous.

They were most certainly correct.

AT&T's intention to buy T-Mobile was not altogether surprising. The company lost its contract with Apple to serve as the exclusive carrier of the company's flagship iPhone, and customers have publicly complained about the firm's notoriously shoddy service in cities such as New York and San Francisco.

AT&T executives said that by purchasing T-Mobile, the company would be poised to significantly expand its coverage without having to construct additional transmission towers. A complicated mix of federal and state laws often prevents such projects from moving forward quickly, and AT&T fears that by expanding its current network without acquisitions, it could face the wrath of disgruntled customers. By purchasing T-Mobile, AT&T executives said the company would be able to both expand its network and implement business cost reductions.

A review issued by the Federal Communications Commission (FCC), which is tasked with reviewing and approving public mergers and acquisitions in the U.S., was not kind to AT&T, and now officials from the telecommunications giant are firing back at the federal organization, Reuters reports.

AT&T accused the FCC of ignoring facts in its highly critical review of the proposed merger. In its staff report, the FCC argued that if AT&T was allowed to buy T-Mobile, customers would face higher prices and many employees would lose their jobs. AT&T, however, is pinning its hopes on the $39 billion deal, and it is intensifying its efforts to convince the FCC the combined company would not stifle competition.

AT&T officials argued that the FCC did not conduct a thorough review of how the merged company would affect the U.S. telecommunications market. AT&T contends that improved spend management and electricity sourcing would enable the merged company to not raise customer rates. Moreover, some analysts said that if the deal is ultimately not approved, AT&T could raise prices as it works to construct billions of dollars worth of new towers.

"The report cherry-picks facts to support its views, and ignores facts that don't. Where facts were lacking, the report speculates," AT&T vice president of external and legislative affairs Jim Cicconi said in a statement.

Cicconi, who is the company's chief lobbyist, asserted the FCC's decision to release its staff report on the proposed deal was perplexing, as agency members did not vote on the assessment.

"This report is not an order of the FCC and has never been voted on. It is simply a staff draft that raises questions of fact that were to be addressed in an administrative hearing, a hearing which [sic] will not now take place. It has no force or effect under law, which raises questions as to why the FCC would choose to release it."

AT&T officially withdrew its FCC merger request, and the company plans to fight a Department of Justice lawsuit that, citing antitrust laws, aims to block the agreement. Analysts said AT&T would likely pursue approval through a variety of other measures. Cicconi remained defiant in his criticism, contending that the FCC report is "so obviously one-sided that any fair-minded person reading it is left with the clear impression that it is an advocacy piece."

The FCC, on the other hand, defended the staff assessment. A spokesperson for the federal agency affirmed its analysts had culled data from hundreds of thousands of pages of documents in their study. The FCC concluded that if the deal were approved, only Omaha, Nebraska, would be left with significant wireless competition.

"The AT&T-T-Mobile merger would result in the single greatest increase in wireless industry consolidation ever proposed," an FCC spokesperson said.

The FCC affirmed it would help create more than 500,000 jobs over the next six years through its $4.5 billion annual fund that aims to bring broadband internet to underserved communities. Cicconi balked at such an assertion.

"This notion - that government spending on broadband deployment creates jobs and economic growth, but private investment does not - makes no sense," he said.

And the battle continues.