The Federal Communications Commission (FCC) criticised the U.S.' largest cellular network AT&T for misleading the regulator about the benefits to the economy, and the wider public its acquisition of T-Mobile would bring.
In a written report [PDF], the communications regulator stated that the merger "raises serious concerns", and that AT&T had "failed to satisfy their burden of demonstrating that [the merger] is in the public interest". Slamming the telecoms giant, it says that AT&T's written evidence was found to be "unreliable" and "at a minimum raises substantial and material questions of fact".
Further into the report, the FCC had all but negated the claims that AT&T had made about its public comments regarding the need for the deal to go through in a bid to deploy next-generation 4G wireless technology, as well as creating a wealth of jobs for the economy as a by-product.
But what AT&T was saying publicly, it had a different internal story.
The FCC had: "identified internal AT&T documents and consistent historical practices that contradict AT&T's claim that merging with T-Mobile is essential for AT&T to build out its LTE network to 97 percent of Americans".
Simply put: AT&T made claims it could not support, and the FCC caught them out. Don't mess with the government.
Over the Thanksgiving vacation, AT&T withdrew its application with the regulator as it saw the deal would fail. In return, the telecoms giant would take a $4 billion charge in a bid to prevent further losses down the line.
But to pull out of a major merger -- effectively in doing so by withdrawing its application for federal approval with the relevant regulator -- was done so 'on the quiet', in the hopes that this would slowly sink away during the holiday festivities.
This was AT&T's "bury bad news" moment: a now common-place reference to the UK government's spin doctor, who took it upon herself to issue a memo to her colleagues, stating that the September 11th terrorist attacks would be a suitable cover to release some not-so flattering news about departmental and political affairs.
Today, however, the FCC accepted the withdrawal of the application, after it emerged that it would not rubber-stamp the merger outright without an administrative hearing. It is not a common move for the FCC to take, but in the eyes of the two companies hoping to merge, this signalled trouble ahead.
The report issued today is without doubt a twist of the knife in the chest of the U.S.' largest cellular network. There were no covert tactics here; a knife to the back would have been clandestine and sneaky. The FCC was anything but.
There were, after all, no grounds for which the FCC was obligated under law to release such a report, highlighted by Jim Cicconi, AT&T's head of external affairs, in an emailed statement.
AT&T objected to the report's release, calling it "troubling" and "improper", not before releasing a blog post full of "facts".
The regulator will submit a full unredacted report to the U.S. Department of Justice shortly, which is currently suing AT&T to prevent the deal from going through. The trial is set for February 2012.
AT&T continues to pursue the merger, but the FCC makes it clear that it will not be easy. Should AT&T wish to re-submit its proposal to acquire T-Mobile, the next submission should not look anything like the one proposed before.
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