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AT&T has 'steep climb' for merger approval

An FCC official said AT&T faces a “steep climb” for approval of its proposed purchase of T-Mobile at the commission, according to various news sources and those with intimate knowledge of the situation.

“There’s no way the chairman’s office rubber-stamps this transaction,” the source told The Wall Street Journal. “It will be a steep climb to say the least.” The FCC source refused to go on the record about the $39 billion deal from AT&T to acquire T-Mobile USA from parent company, Deutsche Telekom.

AT&T has been arguing that the deal is in the public interest and would allow it to cover 95 percent of the country with LTE 4G signals and improve existing 3G technology.

“We understand that Congress, the DOJ, the FCC as well as wireless consumers will have questions about the transaction,” said AT&T spokesman Michael Balmoris. “We look forward to answering and addressing those questions. We are confident that the facts will demonstrate that the deal is in the public interest and that competition will continue to flourish.”

However, the proposed merger would unite the first- and fourth-largest U.S. wireless carriers. If the deal is approved, it wouldn’t be the first time the FCC ultimately approved a deal that it questioned at first. The Comcast-NBC and Sirius-XM mergers are good examples.

According to the Journal’s report, comments by FCC Chairman Julius Genachowski last week indicated the commission’s commitment to encouraging a competitive marketplace.

“While we’re still working through details of a data-roaming framework, I believe the core proposition is beyond dispute: Healthy competition produces greater innovation and investment, lower prices and better service,” Genachowski said.

Genachowski and other FCC commissioners have said nothing on the record about the proposed merger of AT&T and T-Mobile. However, U.S. Sen. Amy Klobuchar, D-MN, questioned the proposed deal.

“Although this deal may spark innovation in the wireless industry,” Klobuchar wrote in a letter to the FCC and Justice Department, “I remain concerned that increased concentration will, at the same time, lead to fewer choices, higher prices and reduced service for wireless consumers.”

Sprint, the third-place U.S. carrier, stands to lose the most from the proposed deal. Sprint’s executives told an industry conference last week that the carrier’s pricing and profitability would be affected if the acquisition were to go through in its current form.

John Stanton, CEO of Clearwire, a Sprint partner, said last week that the deal is “a huge challenge to competition.” Device exclusivity, the CEO told the Journal, was already a problem with AT&T, such as its recent iPhone exclusive, and could only get worse if the carrier had that much more clout. The iPhone deal ended up “stepping on the air hose of T-Mobile” by denying that carrier a fair chance at one of the more popular devices on the network, Stanton said.

It could take almost a year for the regulatory agencies to act on the merger. If it is not approved, AT&T would have to give T-Mobile some spectrum as well as $3 billion in cash.