Senate Antitrust Chairman Condemns AT&T Merger

The chairman of the Senate's Antitrust Subcommittee, Sen. Herb Kohl (D-Wis.), stands strongly opposed to AT&T's (NYSE: T  ) proposed merger with T-Mobile. Earlier this week, Kohl explained his position in unambiguous language in a letter to the Department of Justice and to the Federal Communications Commission. He wrote that "this acquisition … would likely cause substantial harm to competition and consumers, would be contrary to antitrust law … [and] should be blocked by your agencies."

If the regulators do allow the $39 billion merger to go through, AT&T would become America's largest wireless carrier, dropping Verizon (NYSE: VZ  ) into second place and kicking Sprint Nextel (NYSE: S  ) into a distant and untenable third. The merger would also end up giving AT&T and Verizon control of 80% of U.S. cell-phone contracts.

That threat gives consumer groups the heebie-jeebies, so they have welcomed Kohl's decision. But in a move that seems counterintuitive, the Communications Workers of America support the merger. The union argues the deal would create more jobs, an argument that begs credulity if one considers the inevitable merger-created job redundancies.

Kohl is one of the first legislators to publicly express displeasure with the deal. Three house Democrats also sent a letter yesterday calling the deal a "step backward." However, they didn't go as far as Kohl and ask the regulatory agencies to block it.

Why Kohl? Why now?
Kohl isn't running for re-election and is now free to say what he truly thinks. Obviously, he thinks this particular deal stinks. Even though Kohl has been one of the leading Democrats on antitrust issues, this is only the fourth time in the past decade he has voiced opposition to a merger. That could mean either he thinks this deal egregiously breaches the antitrust laws, or political considerations tempered his true feelings in the past about other mergers.

Congress lacks the authority to give a thumbs up or down on this or any other merger, but it can pressure the regulatory agencies to bring more light to their decision-making process. Given all the sudden negativity around its proposed merger, AT&T's quest for wireless dominance may not be a slam-dunk. As that great mergers-and-acquisition specialist, Yogi Berra, once said: It ain't over till it's over.

AT&T's share price jumped by more than 10% in March when it announced the merger and has stayed up there since then. I think it's not unreasonable to assume that a merger decision would affect that price strongly again. Keep track of what happens to AT&T, Verizon, and Sprint Nextel by putting them in your Watchlist.

Fool contributor Dan Radovsky owns shares of AT&T. Motley Fool newsletter services have recommended buying shares of AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On July 23, 2011, at 10:34 AM, lakeman515 wrote:

    The CWA forgot to finish their sentence. They forgot to say the combination of A.T.&T. and T-Mobile would create more jobs FOR THEM not necessarily more jobs in total.

  • Report this Comment On July 23, 2011, at 11:48 AM, XMFDRadovsky wrote:

    Good point.

  • Report this Comment On July 23, 2011, at 6:03 PM, conradsands wrote:

    AT&T has thousands of CWA workers, whereas T-Mobile has only a few.

    Consumers are finally noticing that AT&T and Verizon = The Most Expensive Wireless Plans in America. We know where Verizon (the 10th leading U.S. lobbyist) and AT&T (the 12th leading U.S. lobbyist) get all that money to run commercials 24x7, pay out huge “fat cat” executive bonuses and hire armies of lawyers and lobbyists to push the U.S. market into a wireless industry duopoly -- the American consumer.

    Taking into account the whole U.S. market, a combination of Dallas-based AT&T and T-Mobile will raise the Herfindahl-Hirschman Index (HHI), an accepted measure of market concentration, to 3,216 from 2,848, according to a Bloomberg analysis. Any score above 2,500 indicates a highly concentrated market, and any increase of more than 200 points clearly enhances market power, according to federal guidelines.

    If this ridiculous deal goes through, Sprint will be the only low-priced post-paid national wireless carrier left in the United States. T-Mobile customers are already fleeing to Sprint because they know they won’t get low prices from AT&T or Verizon. But AT&T and Verizon are two of the top corporate lobbyists in the country, so I'm sure the Feds are happy to oblige anything they want to do to secure a stranglehold on the market at the expense of the consumer.

    Reasons against the acquisition:

    - Pricing: Controlling approximately 80 percent of the market would give the Twin Bells significant, unchecked leverage to increase prices for consumers for voice and data.

    - Last Mile Access: Control of most of our nation’s vast wireline infrastructure and the critical “last mile” offers the duopolists the ability to raise competitors’ costs, reduce their network quality and quash competitive alternatives.

    - Choice: Next-generation smartphone and tablet manufacturers would be discouraged from partnering with any company other than AT&T or Verizon because of their massive scale, limiting choice to consumers and opportunity for manufacturers.

    - Innovation: Content and application developers would lack incentive to create content for companies other than the Twin Bells, diminishing innovation and harming developers as well as the capital markets that fund them.

  • Report this Comment On July 23, 2011, at 6:04 PM, conradsands wrote:

    AT&T’s Dirty Money at Work …

    Snippets from CNN story …

    AT&T lobbyists push for T-Mobile deal

    For years, AT&T has been one of the biggest political and lobbying forces in Washington, D.C. Last year, it spent $15.3 million and had 93 lobbyists on its roster, including six former lawmakers. Germany's Deutsche Telekom spent $3 million on lobbying for T-Mobile USA in 2010, armed with 41 lobbyists and one former lawmaker.

    Many lawmakers have a personal interest in seeing AT&T do well. AT&T ranked as the sixth most popular investment among members of the House and Senate in 2009, the most recent year for which such data is available, according to the Center for Responsive Politics.

    And AT&T is considered a heavy hitter during campaign election cycles. In 2010, donors with links to the company made nearly $4 million in campaign contributions to candidates running for federal office.

  • Report this Comment On July 25, 2011, at 2:50 PM, notDonQuixote wrote:

    I'm incredulous about this whole system of justice and merger approvals. I had to sue AT&T as a pro se attorney due to no lawyer wanting to take my case. Now I can not find a congressman, governor,President or any other official that care one bit ( I wrote them all about AT&Ts' last merger). Fortunately the justice department did send the following e-mail which means justice still has a chance. Following this e-mail is a couple of responses from our dedicated congressmen.

    Mon, June 13, 2011 1:30:21 PMRE: 09-CV-00435-HE

    From: ATR-OPS Citizen Complaint Center <Antitrust.Complaints@usdoj.gov>View Contact

    To: bruce cameron <bcc0416@att.net>

    --------------------------------------------------------------------------------

    Dear Mr. Cameron:

    Thank you for contacting the Antitrust Division of the U.S. Department of Justice. The Citizen Complaint Center has reviewed your comments, and we have forwarded them to the appropriate legal staff for further review. We have your information on file and should legal staff need further information, they may contact you in the future.

    We appreciate your interest in the enforcement of federal antitrust laws.

    Sincerely,

    Citizen Complaint Center

    Antitrust Division

    Department of Justice

    From: bruce cameron [mailto:bcc0416@att.net]

    Sent: Monday, May 30, 2011 1:09 AM

    To: ATR-OPS Citizen Complaint Center

    Subject: 09-CV-00435-HE

    To: Margaret Walker

    From: Bruce Cameron

    Hello, I wanted to add a couple of things that the above-mentioned court does not discuss:

    1. I feel AT&T should pay every customer who lived in the ETC areas, in which my case refers, due to

    inadequate due-diligence. If they refuse, then we need to know every thing that was discussed leading up to AT&T deciding not to take these same ETC areas when they purchased everything else of Dodson's.

    2. AT&T sahould demonstrate how they will not violate T-Mobile employee civil rights.

    Now I'm no lawyer, but I beleive I read the law to read that Comnpanies that violate the rights of even a few citizens should give cause to the justice department why they should not loose their government contracts. Shouldn't this take place before they get permission to merge with another company?

    Mon, June 13, 2011 11:52:02 AMResponse from Congressman Dan Boren

    From: Congressman Dan Boren <imaok02@mail.house.gov>Add to Contacts

    To: bcc0416@att.net

    --------------------------------------------------------------------------------

    Dear Mr. Cameron:

    Thank you for contacting my office regarding state issues. I appreciate you taking the time to share your views with me.

    However, the matter you have brought to my attention is not within my jurisdiction as a member of the U.S. House of Representatives. This is a state issue and I would recommend that you contact your state senator or state representative.

    Again, thank you for bringing this matter to my attention, and if there is anything I can do to be of service to you in the future, please do not hesitate to contact my office.

    Respectfully Yours,

    I think he was referring to AT&T being co-sponser of Oklahomas' Sprit of Freedom Statue that sits in our Attorney Generals lobby which pleges alegence to the very freedoms AT&T kept from about 1,000 employees.

    The case number that shows crimes everyone wants to ignore is : 09-CV-00435-HE if you are a lawyer please look it up.

    The following is from my congressman who has yet to respond as promised:

    Mon, May 2, 2011 12:44:16 PMThank you for contacting Congressman Tom Cole

    From: Congressman Tom Cole <tom.cole@mail.house.gov>Add to Contacts

    To: Mr. Bruce Cameron <bcc0416@att.net>

    --------------------------------------------------------------------------------

    Thank you again for contacting my office to share your thoughts. I will get back to you with a response as soon as possible.

    Congressman Tom Cole

    I,m still waiting!

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