AT&T, T-Mobile Designated for Administrative Hearing

FCC's Genachowski could not find deal served public interest

AT&T has a little less to be thankful for this November.

Just as everyone in Washington, DC is headed for grandma's, the Federal Communications Commission decided to make big news about the biggest transaction it's ever had to review. Calling a press briefing at 3:30 p.m. Tuesday, FCC announced Chairman Julius Genachowski circulated a draft order among the Commissioners designating AT&T's $39 billion acquisition of T-Mobile for an administrative hearing, a rare move for the Commission.

This is not good news for the phone giant. "Having your transfer application designated for hearing is typically the kiss of death," one Washington, D.C. attorney, who requested anonymity, tells Adweek.

The FCC seeks an administrative hearing when it determines that a propsed deal does not serve the public interest. In the case of AT&T's purchase of T-Mobile, FCC officials said during the press briefing that the deal would significantly and unprecedentedly diminish competition in the wireless industry. Staff also concluded that AT&T's claims that the acquisition would lead to more 4G build-out and increase domestic jobs were not supported by the facts, and would actually lead to massive jobs loss.

The last time the FCC sought an administrative hearing was in 2002 for the proposed merger between Echostar and DirecTV, a merger that never happened because the parties pulled the deal.

Separately, Genachowski also circulated an order to approve with conditions AT&T's $1.9 billion purchase of spectrum from Qualcomm.

Details of the both draft orders were not released and will not be available until after the Commissioners vote on the final order. There is no timetable when the Commissioners will finalize the orders.

Both draft orders come nine days before the Commission's 180-day "shot clock" on Dec. 1, to complete review of both deals.

The FCC's move is just the latest legal complication for AT&T, which is facing a court challenge  from the Department of Justice. AT&T is also facing separate lawsuits from its competitors Sprint and C-Spire (formerly Cellular South).

AT&T said it was reviewing its options. "The FCC’s action today is disappointing," said Larry Solomon, senior vp of corporate communications for AT&T in prepared statement. "It is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the US economy desperately needs both."


Later, AT&T's chief lobbyist Jim Cicconi, the company's executive vp of external and legislative affairs shot back at the FCC's conclusion that the merger would lead to massive layoffs. "The FCC itself recently claimed that their $4.5 billion broadband [plan] will create 500,000 jobs over the next six years. Yet somehow in our merger, the FCC concluded that a far greater investment in broadband – $8 billion – plus firm commitments on job preservation and enhancement, will instead result in 'massive loss of U.S. jobs and investment.' This notion, that when government spends money on broadband it creates jobs, but when a private company spends money it doesn't, is clearly wrong on its face, and raises questions about the credibility of anyone at the FCC who would make such a claim."