Legal News

AT&T/T-Mobile Tie-up: ?Never Seen a Deal With More Regulatory Risk?

By Ashby Jones

The weekend’s big corporate story is a doozy: AT&T plans to buy T-Mobile USA from Deutsche Telekom for a cool $39 billion. Click here for the lead WSJ story; here for the NYT story; here for the FT story; here for Bloomberg’s take.

The lofty price tag makes the deal almost the largest in a year.

But will it actually come to pass? Put this way by the WSJ’s Spencer E. Ante and Amy Schatz: “Will the U.S. government approve an acquisition that most experts thought was unthinkable until recently?”

Among those giving closest watch: antitrust regulators at the Department of Justice. Of perhaps greatest concern: that the industry’s two dominant companies-Verizon Wireless and AT&T-are already so far ahead of anyone else, with more than 90 million subscribers each, raising the specter of an effective duopoly in mobile telephony.

That said, reports the WSJ, AT&T seems to understand what it’s up against, and has plotted its strategy carefully. Already, AT&T is pushing for the industry to be looked at market by market-essentially city by city-where it argues the industry is for the most part fiercely competitive and has become more so recently with the rise of low-cost carriers and newer providers of fourth generation wireless services.

“This is an intensely competitive marketplace,” said AT&T CEO Randall Stephenson. “When you a watch a show or a football game, what dominates the airwaves? It’s advertising for the mobile marketplace.”

The company also says that 18 of 20 major markets have at least five competitors each. That’s how the government has examined deals, AT&T General Counsel Wayne Watts said, and antitrust lawyers agreed it will be a key factor.

Herbert Hovenkamp, a University of Iowa law professor and antitrust specialist, said the deal would also have a hard time meeting new merger guidelines recently issued by the Department of Justice. “It’s a pretty highly concentrated market,” he said. “The guidelines would say this is a highly questionable merger unless there is a significant provable efficiency.”

In a research note, Credit Suisse analyst Jonathan Chaplin said the deal’s regulatory risk is “enormous.” “We have never seen a deal with more regulatory risk be attempted in the U.S.,” he wrote in the note. “It is unlikely that AT&T would attempt a deal that they knew would fail; however, we can’t see how they would get this through without massive divestitures and concessions.”

Full post as published by Law Blog - WSJ.com on March 21, 2011 (boomark / email).