AT&T's hopes of successfully buying T-Mobile USA are looking more grim by the day. The latest setback has arrived as the Federal Communications Commission issued a staff report that asserted its opposition to AT&T's proposed takeover of the nation's fourth largest mobile provider.
That news came after AT&T and Deutsche Telekom, T-Mobile's parent company, reportedly discussed pooling network assets into a joint venture earlier this week.
However, AT&T is not giving up without a fight -- most evident by the harsh and direct response issued by AT&T on Thursday.
AT&T senior executive vice president of external and legislative affairs, Jim Cicconi, lashed out at the FCC with an official response, labeling the document as "so obviously one-sided that any fair-minded person reading it is left with the clear impression that it is an advocacy piece, and not a considered analysis." He continued on to attest that the report "raises questions as to whether its authors were predisposed, and that it "cherry-picks facts to support its views."
Let's go over some of the highlights about the major points:
On expanding LTE coverage to 97 percent of the U.S.:
The report states, based purely on speculation, that AT&T will expand its LTE deployment from 80% of the population to 97.4% even without the merger. The report says this will occur because AT&T will be forced to do so by competition, despite documents and sworn declarations by AT&T to the contrary. To argue this, the report apparently assumes a high enough level of competition exists in rural areas to compel billions of dollars in investment. Yet the report elsewhere argues that the level of wireless competition in more populated areas of America is so fragile that the merger must be disallowed. At the very least, these conclusions show a logical inconsistency.
The report also claims the AT&T-T-Mobile transaction would result in an increase in spectrum concentration that is unprecedented in its scale. This is simply inaccurate based on the FCC’s own published data, which clearly shows that Sprint-Clearwire has more spectrum today than the combined company would have post-merger. Again, the report manipulates its own spectrum data to support its preferred conclusion.
Boosting job numbers:
Because the report effectively concludes that the billions of additional investment promised by AT&T to deploy 4G LTE mobile broadband service to 55 million more Americans over the next six years will occur anyway, it concludes those billions will create no new jobs and spur no new investment by others. Yet, just two weeks ago the FCC announced that its new $4.5 billion broadband fund, which will help to deploy wireline broadband to a much smaller number of Americans–7 million– over the same time period, will create “approximately 500,000 jobs and $50 billion in economic growth over this period.” This notion — that government spending on broadband deployment creates jobs and economic growth, but private investment does not—makes no sense.
The report hinges its analysis on its characterization of T-Mobile as a critical “disruptive force” in the industry. But it fails even to mention that for the past two years T-Mobile has been losing customers despite growing demand across the industry; it has no clear path to building an LTE network; and that its parent company, Deutsche Telekom, has said T-Mobile will have to become self-funding. This failing is magnified when one considers that the report treats companies such as Leap and Metro PCS, which have gained market share over this same time period, as though they do not even exist.
Sprint, the most vocal opponent to the proposed $39 billion merger, also issued a response in favor of the FCC. Vonya McCann, Sprint’s senior vice president for government affairs, explained in prepared remarks:
The FCC staff’s Analysis and Findings provide a careful, substantive analysis of AT&T’s proposed takeover of T-Mobile, consistent with the FCC’s role as the independent, expert agency responsible for such merger reviews. Rather than accept the expert agency’s Analysis and Findings, AT&T has chosen to make baseless claims about the FCC’s process. Let’s not forget that it was AT&T who tried to game the process by requesting to withdraw its merger application in the pre-dawn hours of Thanksgiving. AT&T can’t have it both ways: either it wanted to have an application that would be judged on the merits or it didn’t.
Funny enough, McCann did note that Sprint agrees "with AT&T on one point however: the public should read the Analysis and Findings on AT&T’s proposed takeover."