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AT&T fires back at FCC report criticizing T-Mobile deal

AT&T says the FCC analysis of its deal to buy T-Mobile USA isn't fair or balanced, accusing the agency of using flawed models and of making claims that contradict internal documents.

December 02, 2011|By Jim Puzzanghera, Los Angeles Times
  • AT&T's response indicates that the company is not giving up on acquiring T-Mobile USA.
AT&T's response indicates that the company is not giving up on… (Spencer Platt, Getty Images )

Reporting from Washington —  

AT&T Inc. blasted a government report criticizing its proposed $39-billion purchase of T-Mobile USA, accusing federal regulators of ignoring key facts and distorting others in findings that were one-sided.

In a lengthy, detailed rebuttal on AT&T's public policy blog, a top executive argued that the staff of the Federal Communications Commission — and, by implication, FCC Chairman Julius Genachowski — was predisposed to reject the deal and that it advocated that position by publicly releasing the report this week.

The fiery post Thursday indicated AT&T was not going to give up on acquiring T-Mobile. If the deal fails to gain regulatory approval — which analysts said is a long shot at this point — AT&T would owe T-Mobile a break-up package worth at least $4 billion.

"The report cherry-picks facts to support its views and ignores facts that don't," wrote Jim Cicconi, AT&T's senior executive vice president of external and legislative affairs. "Where facts were lacking, the report speculates, with no basis, and then treats its own speculations as if they were fact."

"This is clearly not the fair and objective analysis to which any party is entitled and which we have every right to expect," he said.

Christopher C. King, a telecommunications analyst at brokerage Stifel, Nicolaus & Co., said AT&T wanted to lessen the FCC report's effect on public perception of the deal. "Clearly, they're not going down without a fight," King said.

AT&T is still running advertisements in Washington touting the benefits of its purchase of T-Mobile even as the deal has slammed into major regulatory roadblocks.

At the same time, AT&T reportedly is exploring options to try to appease regulators' concerns about a loss of competition in the wireless market, including spinning off some of T-Mobile's assets to another carrier, such as Leap Wireless International Inc. in San Diego.

King said that it's unlikely AT&T could do anything to appease regulators and that the company's best chance to complete the deal is to win the antitrust lawsuit that the Justice Department filed in August to stop the deal.

Last week, Genachowski signaled his opposition by moving to seek a hearing and review of AT&T's application by an administrative law judge.

AT&T and T-Mobile's parent company, Deutsche Telekom in Germany, said last week that they would request permission to withdraw their FCC application so they could focus on the Justice Department suit, which is set to go to trial in February.

The FCC granted the withdrawal request Tuesday. But it also took the unusual step of releasing a 157-page staff report that said the deal would not be in the public interest. One opponent of the transaction, Andrew Jay Schwartzman of Media Access Project, called the report an "evisceration" of the companies' arguments for regulatory approval.

The staff concluded that the combination of AT&T, the nation's second-largest wireless carrier, with No. 4 T-Mobile would harm competition, leading to higher prices. The report also said the deal would do little to expand high-speed Internet access and create jobs — challenging two key arguments the companies have made for regulatory approval.

The FCC report said AT&T's models for making those claims were flawed and were contradicted by the company's internal documents, most of which were redacted from the public version of the report.

For example, the report said the deal would lead to job losses as the companies combine duplicative operations, instead of directly or indirectly creating 55,000 to 96,000 jobs as AT&T contended.

FCC officials said they would provide the Justice Department with an unredacted version of the findings.

Cicconi said the FCC's analysis "willfully ignores critical facts," makes conclusions "based purely on speculation" and "distorts the evidence presented."

As an example, he said, the report dismisses job creation that would be spurred by AT&T's plans to spend billions of dollars over the next six years to expand its fourth-generation wireless network. But even the FCC has argued that its own, more limited efforts to expand broadband Internet access would create 500,000 jobs, Cicconi said. "This notion — that government spending on broadband deployment creates jobs and economic growth, but private investment does not — makes no sense," Cicconi said.

"Conversely, if the FCC had applied to its own broadband fund the same analysis it used for our merger-related investments, the result would be similar — zero new broadband, zero jobs, zero growth," he said.

The FCC responded to AT&T's criticism by reiterating the report's findings that the deal "would result in the single greatest increase in wireless industry consolidation ever proposed."

The agency said that the report was objective and that the analysis mirrored findings by the Justice Department and several state attorneys general that "the transaction would decrease competition, innovation and investment and harm consumers."

jim.puzzanghera@latimes.com

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