FCC moves toward blocking AT&T's T-Mobile takeover

Deutsche Telekom Chairman and CEO Rene Obermann, left, and AT&T Chairman and CEO Randall Stephenson pose for photos in March after a cash-and-stock deal valued at $39 billion that would make AT&T the largest cellphone company in the U.S. (AP Photo / Newscast, Mark Dye)

T-Mobile customers who chose the carrier because it's generally the cheapest of the national carriers, and anyone else who care about the future of U.S. wireless competition, should be heartened by the news  from the Federal Communications Commission: FCC Chairman Julius Genachowski is calling for hearings on the $39 billion deal, based on the FCC staff's conclusion that the merger would hurt consumers and competition while killing jobs.

The Justice Department is already challenging the merger - as are Pennsylvania and at least six other states - on grounds that it would be anticompetitive.  The FCC has a broader responsibility to act in the public interest, and plainly sees the consolidation as harmful.

Is the deal kaput, now that the Justice Department and FCC staff have concluded the obvious - that cutting the number of national carriers from 4 to 3 would hurt competition, and the FCC also sees economic harm?

"The record clearly shows that - in no uncertain terms - this merger would result in a massive loss of US jobs and investment," said a senior FCC official who spoke on the condition of anonymity.

There was quick evidence of pushback yesterday from the Communications Workers of America, which has allied with AT&T to defend the merger. "AT&T has promised to retain 23,000 call center, retail and technical workers who now have no clear employment path. Additionally, AT&T has committed to return 5,000 jobs to the U.S. from Asia and invest $8 billion in new capital and broadband buildout," the CWA said.

But consumer advocates agreed with the FCC staff that wireless customers would suffer from the merger.

Consumers Union said a recent price analysis of AT&T and T-Mobile voice and data plans "demonstrates that T-Mobile wireless plans typically cost $15 to $50 less per month than comparable plans from AT&T."  CU said also that T-Mobile outscored AT&T on the nonprofit group's recent wireless-customer satisfaction survey, "suggesting the proposed merger would be a setback to T-Mobile customers if it led to service more resembling AT&T’s than T-Mobile’s."

Although AT&T could appeal any adverse decision by the FCC or fight the Justice Department in court, Medley Global Investors analyst Jeffrey Silva told clients that the FCC hearings will help insulate the decision from politics. "Neither time nor momentum is on the side of AT&T or T-Mobile," Silva said.

But time may be on the side of consumers who value having T-Mobile as an option. And T-Mobile may ironically find itself in a stronger position if the deal finally falls through, thanks to this $3 billion breakup fee that AT&T will owe the carrier and its German parent company, Deutsche Telekom.