[NSNBC] Senate Antitrust Chairman Condemns AT&T Merger

Senate Antitrust Chairman Condemns AT&T Merger

Politicians are starting to grumble about the AT&T–T-Mobile merger.

By Dan Radovsky
updated 7/23/2011 5:30:00 AM ET

The chairman of the Senate’s Antitrust Subcommittee, Sen. Herb Kohl (D-Wis.), stands strongly opposed to AT&T‘s 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 into second place and kicking Sprint Nextel 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.

 

http://www.msnbc.msn.com/id/43865408/ns/business-motley_fool/

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