Home Local News PR joins suit against AT&T/T-Mobile deal
Issued : Friday, September 30, 2011 09:30 PM
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PR joins suit against AT&T/T-Mobile deal

By CB Online Staff

The Puerto Rico Justice Department is joining the U.S. Justice Department’s antitrust lawsuit against AT&T’s $39 billion takeover of T-Mobile USA Inc.

Puerto Rico followed seven states that have already signed on to federal government’s legal bid to block the merger. The U.S. Justice Department amended the suit to add Puerto Rico on Friday.

The U.S. Justice Department filed suit in late August to block AT&T’s $39 billion deal to buy T-Mobile USA on grounds that it would raise prices for consumers. Seven states joined the suit on Sept. 15.

The government contends that the acquisition of the No. 4 wireless carrier in the country by No. 2 AT&T would reduce competition and that would lead to price increases.

Deputy Attorney General James Cole said the combination would result in “tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services.”

AT&T said it would fight and ask for an expedited court hearing “so the enormous benefits of this merger can be fully reviewed.” The company said the government “has the burden of proving alleged anti-competitive effects, and we intend to vigorously contest this matter in court.”

Four nationwide providers — Verizon, AT&T, T-Mobile and Sprint — account for more than 90 percent of mobile wireless connections.

T-Mobile has been an important source of competition, including through innovation and quality enhancements such as the roll-out of the first nationwide high-speed data network, according to Sharis Pozen, acting chief of Justice’s antitrust division.

Mobile wireless telecom services play an increasing role in day-to-day communications, with more than 300 million smart phones, data cards, tablets and other mobile wireless devices in use.

The proposed cash-and-stock transaction would catapult AT&T past Verizon Wireless to become the nation’s largest wireless provider, and leave Sprint Nextel Corp. as a distant number three.

AT&T and T-Mobile compete nationwide, in 97 of the largest 100 cellular marketing areas, according to the suit filed in U.S. District Court in Washington. They also vie for business and government customers.

The suit says AT&T’s acquisition of T-Mobile would eliminate a company that has been a competitive factor through low pricing and innovation. T-Mobile had the first handset using the Android operating system, Blackberry wireless email, the Sidekick smart phone, national Wi-Fi “hotspot” access and a variety of unlimited service plans.

Federal Communications Commission chairman Julius Genachowski said last month that the record before his agency “raises serious concerns about the impact of the proposed transaction on competition.” The FCC’s separate review of the proposed merger is not complete.

Since AT&T first announced the deal in March, it has insisted that consumers would have a choice of multiple wireless providers, including Leap, Metro PCS and U.S. Cellular, in many markets even if the deal is approved.

But the department rejected that argument. It said regional providers face “significant competitive limitations” because they do not have national networks. The department said the enormous investments and resources needed to acquire wireless spectrum and build a network make it very difficult for new companies to enter the wireless market.

AT&T and T-Mobile also have said the merger would reduce dropped and blocked calls, and speed mobile Internet connections for subscribers. Faster service would result by combining their limited wireless spectrum holdings at a time when both companies are running out of airwaves to handle mobile apps, online video and other bandwidth-hungry services.

Finding more airwaves to keep up with the explosive growth of wireless broadband services is a priority of the FCC and the Obama administration.

But the Justice Department said AT&T could “obtain substantially the same network enhancements ... if it simply invested in its own network without eliminating a close competitor.”

The deal has faced tough opposition from consumer groups and No. 3 carrier Sprint since it was announced in March. Among its critics is the Puerto Rico Telecommunications Regulatory Board (TRB), which formally filed its opposition to the merger with the Federal Communications Commission (FCC) last month citing anticompetitive concerns.

The TRB, in a letter dated August 4 and posted on the FCC website, urged the federal watchdog to require AT&T to divest T-Mobile’s operation in Puerto Rico if the merger goes forward.

“While the impact of AT&T’s proposed purchase of T-Mobile from Deutsche Telecom on competition nationwide or in other locales can be debated,” said the letter signed by TRB Chairwoman Sandra Torres López. “There can be no debate that its impact on competition in Puerto Rico will be significant.”

The letter explained that the proposed merger would eliminate an important competitor from the Puerto Rico wireless marketplace, T-Mobile, and likely lead to further consolidation.

“Because the anticompetitive effects of the proposed transaction will be felt, in particular, in Puerto Rico, it is essential that the Commission carefully scrutinize the proposed transaction to mitigate its impacts,” Torres said.

With the merger, AT&T’s share of the Puerto Rico cellphone market would climb from 31 percent to 48 percent. AT&T’s increase in market share and the disappearance of a competitor has the potential to create an oligopoly in the wireless industry locally as well as stateside.

In Puerto Rico, AT&T/T-Mobile and Claro/Puerto Rico Telephone combined would control 80 percent of the local wireless market. In the states, AT&T/T-Mobile and Verizon would control around 75 percent of the market.

Most disturbing for the TRB is that there is cross-ownership between AT&T and América Móvil, the parent company of Claro Puerto Rico. AT&T owns a substantial number of shares in América Móvil, the parent company of Claro Puerto Rico, and AT&T executives have sat on América Móvil’s board of directors.

Furthermore, according to the TRB, AT&T and América Móvil have been found to have shared competitive data on spectrum licenses in Puerto Rico, specifically.

Concluding their first official statement to the TRB on the AT&T/ T-Mobile Merger, the board urged the FCC, if they approve the merger, to require T-Mobile Puerto Rico operations be divested from the merger so that competition in the Puerto Rico wireless market is not adversely affected.

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