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AT&T/T-Mobile: Three Key Realities Why Merger Gets Approved
Submitted by Scott Cleland on Mon, 2011-08-01 15:25
In the end, the U.S. Government is highly-likely to approve the AT&T/T-Mobile merger, despite the significant opposition, because of three over-riding realities: 1) market/financial realities, 2)DOJ legal/precedent realities, and 3) FCC public-interest realities.
I. Market Reality:
T-Mobile's leadership and owners have decided that they are unable and unwilling to invest what is necessary in order to compete going forward in the American 4G wireless market, and given that fundamental premise, the AT&T/T-Mobile merger is the optimal market outcome for T-Mobile's customers and for competition.
So the key baseline fact grounding the DOJ/FCC's decision processes here, is that T-Mobile's leaders/funders are effectively exiting this business one way or another long term via merger, sale or benign neglect.
The other dimension of the market reality here is comparing the relative options available to T-Mobile.
If staying independent is not viable long term, then which partner is best for T-Mobile's customers, employees, and shareholders?
The overarching reason T-Mobile was not interested in being acquired by Sprint is the same reason Verizon logically was not interested in T-Mobile -- i.e. technology incompatibility.
Why the DOJ ultimately will not block the AT&T/T-Mobile merger (which at worst is a 4 to 3 consolidation and in many markets is a 6 to 5 or 5 to 4 consolidation), is that the DOJ knows that there is slim chance the courts would support a DOJ injunction to block the acquisition, because it would be viewed as capricious by the court based on the DOJ's very long history of precedents (several) in evaluating these wireless markets on a local (not national) market basis, and also given the DOJ's 2008 approval of the ostensible 2 to 1 XM-Sirius consolidation that has not proven anti-competitive three years later.
Moreover, given that the DOJ has a tried and true system of divestiture remedies that have worked in the past, and given that AT&T has signaled it would be amenable to divestitures in select potentially problematic markets in this merger, a DOJ attempt to block AT&T-T-Mobile in court would have a steep uphill argument to justify that the DOJ did not "move the goalposts" in the middle of the game, and act in an arbitrary and capricious way (given the facts of DOJ's previously-approved wireless mergers, T-Mobile's clear determination in exiting the market, and the fact that it was T-Mobile which reached out to AT&T to merge, not the other way around.)
Furthermore, this DOJ knows that the facts and precedents of this case make it a loser legally in court, if the DOJ were to somehow gamble and try to legally challenge this acquisition in Federal Court.
III. FCC Reality:
This FCC has loudly and consistently declared that its highest priority is accelerating more and faster broadband to all Americans, when arguably the single decision the FCC could make to most quickly and effectively advance its top priority and broadband goals would be to approve the AT&T-T/Mobile merger.
Moreover, the Administration proposed a wireless broadband deployment initiative to reach 98% of Americans by ~2016 (that would require passage of new legislation and implementation of new government implicit subsidies), while this AT&T/T-Mobile merger would achieve virtually all of the President's goal, in a similar or faster timetable, with much greater likelihood of timely success, and without any need for Government legislation or subsidy.
Furthermore, it will be extremely difficult for the FCC, which claims to be supportive of the President's Executive Order to minimize government actions or regulations that would slow economic growth and hurt job creation, to regulate or effectively ban this merger's economic growth and job creation benefits.
The FCC reality is that they have already clearly defined this FCC's public interest standard to de facto be promoting accelerated broadband deployment in their National Broadband Plan and that the Administration has defined a new de facto public interest standard for independent regulatory agencies in his Executive Order:
In sum, despite the false and unsupportable claims that this merger would create a duopoly, three key realities -- severe market capital constraints, favorable DOJ legal precedents, and new FCC/Administration de facto public interest standards -- all point to the AT&T/T-Mobile merger ultimately getting DOJ and FCC approval.