AT&T seen selling assets to get nod for mega deal

Mon Mar 21, 2011 7:39pm EDT
 
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By Diane Bartz and Jasmin Melvin

WASHINGTON (Reuters) - AT&T Inc will likely be forced to sell major assets and pledge to expand service to poor areas to get approval from the U.S. government for its $39 billion deal to buy Deutsche Telekom AG's T-Mobile USA.

Antitrust experts say the merger, which will create the largest U.S. wireless service provider, faces a tough review by competition and communications regulators that could take as long as 18 months, but that it will ultimately be approved.

The deal gives AT&T -- the No. 2 U.S. mobile service often criticized for dropped calls and slow connection speeds -- more capacity to meet ever-growing demands for videos and data from devices such as Apple's iPhone.

It will have about 130 million customers and hold roughly 43 percent of the U.S. wireless market, a concentration that sparks major regulatory concerns. Both the Federal Communications Commission and the Justice Department could force the combined entity to give up precious assets, including chunks of U.S. airwaves, known as spectrum, experts said.

The FCC could go further than the DOJ, asking for AT&T to expand wireless service to poor and rural areas, and for service promises including more packages with data roaming.

"I would expect that DOJ would require divestitures of spectrum and possibly other assets ... in a significant number of local markets," said Beau Buffier, an antitrust expert with Shearman & Sterling LLP. He added, however, that that won't materially affect the economics of the deal for the parties.

Sen. Amy Klobuchar, a Minnesota Democrat who has criticized wireless carriers for failing to serve rural areas, on Monday urged the government to "take a close, hard look" at the deal.

"Although this deal may spark innovation in the wireless industry, I remain concerned that increased concentration will, at the same time, lead to fewer choices, higher prices and reduced service for wireless consumers," she wrote to FCC Chairman Julius Genachowski and Christine Varney, the head of the Justice Department's antitrust division.   Continued...