Mobile

Mobile Math: 4>2

3/28/2011 12:01 AM Eastern

Washington — AT&T was trying to sound all the right
notes when it unveiled its proposed $39 billion merger
with one of its fellow top-four
wireless carriers — T-Mobile — a
deal that was tailor-made to sound
alarm bells with public-interest
groups, and did.

A horizontal merger in a space
the FCC has already said is concentrated
sounds like an uphill
climb, but it may come down to
simple math: Four is greater than
two.

The four is the 4G wireless
broadband service that AT&T has
promised it will be able to deliver
to 95% of the country if the FCC
and Justice Department allow the
merger. That just happens to be
the target of the Obama administration
in its recently announced
National Wireless Initiative.

Meanwhile, the FCC last week was “spectrum central”
as chairman Julius Genachowski spoke to the International
CTIA Wireless 2011 trade show about the need for
speed — for applications and in terms of freeing up spectrum
for wireless broadband.

AT&T had that covered, too, arguing that the merger
would provide it a “solution,” at least in the short-term,
to its looming spectrum crunch in some markets.

The “two” in that mathematical expression is the duopoly
that public-interest groups like Free Press and Public
Knowledge said would be strengthened by what they
called an “unthinkable” combination.

Sanford Bernstein, which said it thinks the deal has
a “very high hurdle” in D.C., estimated that the combined
companies would have 45% of all U.S. wireless
subscribers, and the “duopoly” of the new AT&T and
Verizon Wireless would serve 84% of the nation’s total
subscribers.

There was no clear signal as to the deal’s prospects,
though. AT&T said it was confident the deal would be
approved and set the timetable at
about a year.

AT&T was confident enough
to agree to pay T-Mobile owner
Deutsche Telecom a reported $3
billion breakup fee if the deal fails
for regulatory reasons, according
to Sanford Bernstein.

An aide to one of the FCC’s
Democratic commissioners was
unsure of the deal’s prospects.

Media-concentration critics on
Capitol Hill — most notably Senate
Commerce Committee Jay Rockefeller
(D-W.Va.), who said no stone
would be left unturned — called
for hearings, though that’s an
oversight committee’s job.

Despite much opposition, the
joint-venture deal that gave Comcast control of NBC
Universal made it through the approval process in about
a year. There’s a difference between the deals, though:
AT&T/T-Mobile is a primarily horizontal merger between
competitors that would further consolidate an
already concentrated market.

But AT&T could agree to divest in some markets to improve
its chances of approval.

And with the Obama administration essentially having
given the wireless industry its marching orders about
reaching 95% of all wireless subs with 4G and Genachowski
calling for spectrum solutions, AT&T can argue
this is the quickest route toward giving the president and
chairman what they asked for.

March