Verizon To Remain Mum on AT&T/T-Mobile Merger

By Josh Long

Dont expect Verizon Communications to weigh in on whether U.S. regulators should approve AT&Ts $39 billion acquisition of T-Mobile USA.

Unlike Sprint Nextel, Verizon wont be filing comments with the Federal Communications Commission on the merger or taking a position on the transaction, Verizon Communications spokesman Ed McFadden said.

Approval should be made on the merits of the deal,” he said.

However, Verizon is concerned over the potential that regulators could use the merger to impose regulations that would impact the broader industry such as promulgating regulations that dictate who can bid on certain kinds of spectrum or citing the transaction as a reason to examine special access rates, McFadden said.

Some analysts have speculated that merger approval could pave the way for Verizon Wireless the joint venture between Verizon Communications and Vodafone Group Plc to acquire another company like Sprint, the third-largest U.S. wireless operator.

Although we remain skeptical that Verizon (VZ) will purchase Sprint, we believe the deal makes it slightly easier for Verizon to buy” a satellite TV provider like DIRECTV and DISH Network, wrote Stifel Nicolaus analysts David Kaut and Rebecca Arbogast in a research note issued March 29. CenturyLink-Qwest or cable may look at Sprint down the road; and there could be further roll-ups of the smaller wireless carriers.”

If approved, the merger would enable AT&T to surpass Verizon Wireless as the largest wireless provider in the United States and further its lead over Sprint.

In a 377-page filing Tuesday with the FCC, Sprint formally opposed a merger that it said would leave AT&T with 118 million subscribers and 43 percent of the post-paid market.

The merger, Sprint asserted, would create a Twin Bell monopoly” with AT&T and Verizon Wireless controlling 82 percent of all postpaid subscribers.

The FCC is scrutinizing the merger to determine whether it is in the public interest, and its review could take a year or longer. The DOJ also will review the transaction under federal antitrust law, and some states like California and Louisiana could further hold up final approval.

U.S. regulators rarely reject such deals outright, but there is some precedent for the federal government to oppose the merger. 

On Oct. 5, 1999, Sprint Corp. and MCI WorldCom announced a $129 billion merger agreement. The DOJ later sued to block WorldComs acquisition of Sprint, and the companies subsequently withdrew their application to combine operations.

Bartlett D. Cleland, policy counsel with the Institute for Policy Innovation, asserted today that the FCCs review process is broken.”

Decisions take well more than a year in many instances, when an innovation cycle in technology takes 18 months,” wrote Cleland in TechBytes, which is published by the Institute for Policy Innovation. Technological innovation and advance must not be slowed to the pace of government, resulting in market uncertainty, discouraged and restrained investment, and decreased economic growth.”

But a swift review of such a deal could subject U.S. regulators to criticism that they are simply rubber-stamping mergers that involve large companies rather than investing the time and resources to objectively analyze the transaction under federal law.

In an interview with the Wall Street Journal earlier this year, an FCC official said, There’s no way the chairman’s office rubber-stamps this transaction. It will be a steep climb to say the least.”