AT&T rebuts critics of planned $39-billion T-Mobile purchase in FCC filing

In a filing with the FCC rebutting critics and touting the virtues of its planned $39-billion acquisition of T-Mobile USA, AT&T (NYSE:T) declared that the acquisition has drawn "unprecedented support" from government officials, organized labor, the high-tech industry, minority advocates and rural communities.

AT&T again cited its pending spectrum crunch, T-Mobile's road to failure and the fact that the combined companies would be able to serve 97 percent of the country's population as reasons why the FCC should accept the deal. AT&T reiterated that without T-Mobile it would only roll out LTE services to 80 percent of the nation's population.

AT&T also spent quite a bit of time rebutting the arguments of its opponents, one of the loudest being Sprint Nextel (NYSE:S). "To hear the opponents tell it, T-Mobile USA--with approximately 11 percent of subscribers nationwide, steadily declining market share, and no clear path to LTE--is all that stands between today's 'era of competition and growth' and 'an entrenched, anti-competitive duopoly.' (Quoting Sprint's filing) is implausible, to say the least," wrote AT&T. "Several months ago, J.P. Morgan described the company as 'struggling for relevance' in this increasingly competitive market, and T-Mobile USA's first quarter numbers reinforce that concern."

During the first quarter, T-Mobile lost 99,000 subscribers, bringing its total subscriber base to 33.6 million, down from 33.7 million a year ago. In addition, T-Mobile's profit dropped to $135 million, down from $362 million a year ago.

AT&T also said, among other things, that opponents of the deal are wrong in saying that AT&T will be left with an inordinate amount of spectrum. AT&T pointed to the combined position of Clearwire (NASDAQ:CLWR) and Sprint, saying their holdings are much stronger than AT&T's. And it cited several public comments that Sprint has made in bragging about its spectrum position with Clearwire--160 MHz of spectrum in the top markets.

"More important, the relevant question is not how much spectrum a provider holds in some absolute sense, but whether the amount of spectrum a provider holds in a particular area is sufficient to handle the bandwidth demands generated by its subscribers in that area, who (in AT&T's case) are using three different generations of technology (GSM, HSPA and LTE)," said AT&T. "AT&T's current spectrum holdings are fast becoming inadequate for that purpose in a growing number of markets."

AT&T took specific aim at Sprint's contentions that the deal is anti-competitive, and will lead to less consumer choice and a wireless duopoly with Verizon Wireless (NYSE:VZ) . "Sprint identifies no plausible basis for supposing that, post-merger, AT&T could benefit from raising its backhaul rates above today's levels," the company said in the filing. "To the contrary, that strategy would likely generate lost upstream profits that the company could not hope to recoup in the downstream wireless market," the filing said. "Nor, again, is it plausible to suggest-as Sprint does in another key step of its dystopian scenario--that AT&T's arch-adversary Verizon would decide to increase its own prices rather than win more customers from AT&T by keeping its prices low."

For more:
- see AT&T's redacted filing
- see this PC Magazine article
- see this WSJ blog post (sub. req.)

Related Articles:
T-Mobile losses mount, 99K subs defect in Q1
MetroPCS argues against AT&T/T-Mobile deal, but offers conditions
Leap formally opposes AT&T/T-Mobile deal
MetroPCS, Leap open to scooping up divested AT&T/T-Mobile assets
In FCC filing, Sprint blasts AT&T for inept network management
RCA, Consumers Union blast AT&T/T-Mobile transaction in congressional appearance
AT&T execs hit the road in defense of T-Mobile deal
Collapse of T-Mobile deal would cost AT&T $6B

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