AT&T, T-Mobile Joint Venture Considered

Facing increasing regulatory hurdles, AT&T and Deutsche Telekom are exploring an alternative to the merger between AT&T and T-Mobile USA.

The companies have discussed forming a joint venture that would include network assets from AT&T and T-Mobile USA if the current deal breaks down, The Wall Street Journal has reported, citing people familiar with the matter.

Such a joint venture could avoid competitive concerns that have been expressed by the Department of Justice, the newspaper said, cautioning that the talks weren’t in an advanced stage.

The report surfaced after the Federal Communications Commission released a scathing report that concludes the merger between the nation’s second- and fourth-largest wireless providers is not in the public interest. The analysis and findings from FCC staff don’t constitute official action by the agency, but could hurt AT&T in its antitrust case against the U.S. Department of Justice over whether the deal is anticompetitive. The FCC released the report despite granting the requests of AT&T and Deutsche Telekom to withdraw their applications to approve the merger after the companies learned that the agency wanted to hold an administrative hearing on the merits of the deal.

In spite of the regulatory setbacks, AT&T is still focused on building its case for its $39 billion acquisition of T-Mobile USA and expects to have a reasonable chance of prevailing against the Justice Department, the Journal reported, citing people familiar with the matter.

The Department of Justice filed a lawsuit in August to block the merger, and a trial is scheduled for February.

Antitrust authorities claim the merger would burden tens of millions of consumers with fewer choices, higher prices and lower-quality products. Meanwhile, FCC staff found that the merger would result in just two wireless providers — AT&T and Verizon Wireless — controlling 75 percent of the market, greatly reducing competition and undermining critical goals of the Communications Act.

In a blog, an AT&T executive characterized the FCC’s report as "so obviously one-sided that any fair-minded person reading it is left with the clear impression that is an advocacy piece, and not a considered analysis." But FCC staff — which included engineers, economists and lawyers — said it "conducted an exhaustive review of the proposed transaction" that included reviewing thousands of pages of pleadings, issuing multiple requests for information and documents to AT&T, T-Mobile USA and third parties, and reviewing more than 200,000 documents that were produced in response to such requests.

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