AT&T Faces New Hurdle

The Federal Communications Commission made clear how deep its opposition runs to AT&T's proposed $39 billion deal to acquire T-Mobile USA, saying AT&T must face an extra review next year that could eat up months even if the company wins an antitrust trial. AT&T called the action disappointing.

The unusual decision by the FCC to call the extra hearing -- its first such move in nine years -- adds a new roadblock and forces AT&T to consider an unpalatable range of options. Giving up on the deal isn't an easy choice, because AT&T is on the hook to pay T-Mobile parent Deutsche Telekom AG a breakup fee of $3 billion plus airwaves and other rights worth an additional $3 billion or so. The merger agreement requires AT&T to secure all necessary approvals to close the deal by Sept. 20 -- a timeline that is now at risk, though the companies could agree to extend the deadline. AT&T can still opt to fight it out in Washington, but the Nov 22 move by the FCC showed that the company would have to overcome deep skepticism about the merits of allowing the second- and fourth-largest U.S. cellphone providers to combine. An FCC official said the agency has reached a conclusion similar to that of the Justice Department, finding that the combination would "significantly diminish competition." FCC officials questioned AT&T's statements that the merger would benefit consumers and allow the company to expand high-speed fourth-generation wireless service across the country faster. They also said confidential documents filed at the agency didn't support AT&T's contention that the deal would create nearly 100,000 jobs. An FCC official said the combination would instead "lead to massive job losses." FCC Chairman Julius Genachowski is preparing a formal request for the administrative hearing, officials said, and the request is expected to get the approval of FCC commissioners. The hearing would happen after the antitrust trial, assuming AT&T won the trial. An FCC administrative law judge would hear evidence from both sides. The administrative judge would then make a recommendation on the deal, which would then go to the FCC's commissioners for approval. (Nov 23)