RCA, Consumers Union blast AT&T/T-Mobile transaction in congressional appearance

AT&T (NYSE:T) and Deutsche Telekom executives again appeared before Congress to press their case for AT&T's proposed $39 billion purchase of T-Mobile USA. And again the executives faced heat from lawmakers, public-interest groups and representatives from smaller wireless carriers, who reiterated arguments that the proposed merger will stifle innovation in wireless and result in increased prices for most Americans.

Specifically, Parul Desai from Consumers Union said T-Mobile currently offers wireless service at prices $15 to $50 per month less than similar offerings from AT&T. She said that if AT&T's purchase of T-Mobile is approved, consumers likely will be forced to pay more for their wireless service.

Steven Berry, president and CEO of the Rural Cellular Association, echoed many of Desai's points, arguing that the smaller carriers that RCA represents will face higher roaming costs if the merger is approved. He also warned that the FCC likely will tighten its oversight of the wireless industry if the merger is approved, leading to additional and possibly stifling federal oversight of the wireless industry. Berry concluded that "this takeover cannot be conditioned into acceptance," arguing that divestitures won't lessen the market effect of a combination of AT&T and T-Mobile.

Interestingly, Berry also suggested that Verizon Wireless (NYSE:VZ) could acquire Sprint Nextel (NYSE:S) if AT&T's purchase of T-Mobile is approved.

AT&T's Randall Stephenson and DT's Rene Obermann countered that the merger of AT&T and T-Mobile will allow AT&T to continue competing in the U.S. wireless market by supplying the carrier with needed spectrum and capacity. Indeed, AT&T yesterday disclosed it plans to launch LTE service in five markets this summer.

Executives from AT&T, DT and Sprint appeared at a similar congressional hearing earlier this month to argue many of the same points.

Representatives from the House's Subcommittee on Intellectual Property, Competition and the Internet raised a number of issues during the event's question-and-answer session, including whether a combined AT&T and T-Mobile will control the market for backhaul services. AT&T's Stephenson said the market for backhaul is crowded and competitive with the likes of cable and microwave vendors. RCA's Berry countered that AT&T and Verizon command the lion's share of the backhaul market.

The FCC is overseeing a proceeding to determine the competitive situation of the U.S. market for backhaul.

As the battle continues to drag on in Congress, AT&T and Sprint are working to bring the fight over the deal to individual states. Sprint recently noted that the Louisiana Public Service Commission voted 4-1 to open a formal proceeding on the AT&T/T-Mobile transaction, a move Sprint said AT&T opposed. Sprint said similar proceedings against the deal are beginning to get underway in California and West Virginia.

AT&T, for its part, said the governors of Arkansas, Georgia, Idaho, Louisiana, Maine, Michigan, Oklahoma, Texas and South Carolina have sent letters to the FCC urging the agency to approve the deal.

AT&T and DT have said they expect the transaction to be complete by early next year. AT&T would owe DT up to $6 billion in cash and assets if regulators fail to approve the deal.

For more:
- see this AT&T release
- see this Sprint release

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