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Judge Waives a Key Barrier in AT&T's Bid to Buy McCaw : Telecommunications: The $12.6-billion deal faces one more regulatory hurdle. One Baby Bell vows it will appeal.

August 26, 1994|JUBE SHIVER Jr. | TIMES STAFF WRITER

WASHINGTON — Clearing the next-to-last regulatory hurdle, AT&T won federal court approval Thursday to proceed with its $12.6-billion acquisition of McCaw Cellular Communications--the nation's largest cellular telephone provider.

U.S. District Judge Harold H. Greene in Washington waived parts of a 1984 Justice Department consent decree that would have prevented AT&T from acquiring cellular telephone properties co-owned by McCaw and several regional telephone companies.

Greene, the judge who presided over the breakup of the old AT&T monopoly a decade ago, said a more competitive telecommunications marketplace has produced "changed circumstances" that justify granting the waiver to AT&T and McCaw.

Lawyers for BellSouth Corp., one of the "Baby Bell" companies divested by AT&T, had argued in a lawsuit that a provision of the 1984 decree prohibited AT&T from acquiring the stock or assets of any of the regional Bells. The company claimed that AT&T could not acquire McCaw cellular properties, located in California and nine other states, in which BellSouth and other Baby Bells hold a financial interest.

Greene rejected the argument, saying the decree "was never intended to prevent AT&T from competing in the cellular marketplace." But the judge reserved the right to require AT&T to divest itself of the contested cellular properties if he finds that a related consent judgment proposed by the Justice Department "is not in the public interest."

The deal must still be reviewed by the Federal Communications Commission, which will examine the parties' application for transfer of various communications licenses. And BellSouth said it will appeal Greene's decision.

Nevertheless, AT&T is an important step closer to entering the fast-growing cellular business, which has been adding an average of 1,000 new customers a day.

"This was the big hurdle," said Mark Lowenstein, an analyst with the Yankee Group consulting firm in Boston. "The decision sends a pretty clear signal that Judge Greene expects the overall (telecommunications) environment to become more competitive."

With AT&T's marketing and financial muscle behind cellular phones, Lowenstein added, there will be a lot more "awareness about wireless services." The company for weeks has been running TV ads depicting a futuristic era of go-anywhere communications.

In New York Stock Exchange trading Thursday, AT&T was unchanged at $54.375. McCaw added 37.5 cents to $53.50.

BellSouth general counsel Walter Alford vowed to appeal Greene's decision unless the Baby Bells are given the same freedom as AT&T to compete in the long-distance and cellular phone businesses.

Currently they are restricted from doing so by federal and some state laws. Legislation aimed at lifting those restrictions has cleared the House of Representatives and is before the Senate.

Greene acted a month after the nation's largest long-distance telephone company and McCaw signed a pact with the Justice Department that would permit the combination, subject to conditions guaranteeing competing long-distance carriers equal access to the McCaw cellular network, and AT&T safeguards ensuring that its cellular equipment customers--who often compete head-to-head with McCaw--are not left at a disadvantage.

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