WASHINGTON—Consumer advocates asked the Justice Department to block AT&T Inc.’s proposed $67 billion acquisition of fellow Baby Bell BellSouth Corp., while organized labor described the deal as a “critical opportunity.” AT&T and BellSouth also control the country’s largest wireless operator Cingular Wireless L.L.C.
“Congress and federal regulators need to look carefully at the lifeless ‘competition’ their flawed policies have created and reject this merger,” said Gene Kimmelman, vice president for federal and international affairs for Consumers Union. “The government has been deceived before by promises that somehow more concentration would produce more choices and competition, when the result has been just the opposite. It shouldn’t be fooled again.”
He added: “If approved, this merger will lead to higher local, long distance and cell phone prices for consumers across the country.”
For unions, the proposed merger represents a chance for job creation for a new telecom company better able to complete in an increasingly global marketplace.
“CWA hopes that this announcement will mean a new day for U.S. policy makers, consumers and workers in this industry. We need to make sure that government, policy makers and citizens truly grasp the promise of this industry. Equally important is that our potential to regain the global lead in communications services as the backbone of our economy not simply be an adjunct to entertainment for the rich and upper middle class,” said Larry Cohen, president of the Communications Workers of America.
AT&T said it expects the combined company’s workforce to be reduced by at least 10,000 during the next three years. Candice Johnson, a spokeswoman for CWA, said the union’s statement does not necessarily represent an endorsement of the proposed merger.
Stifel, Nicholas & Co. analysts said they expect the Justice Department and Federal Communications Commission to sign off on the AT&T-BellSouth transaction.
“In the long run, we believe the deal creates a more formidable competitor to Verizon [Communications Inc.] in the enterprise and wireless markets and for cable in video and high-speed data,” said Stifel Nicholas.
“We believe the improving wireless business makes for a compelling reason to bring Cingular under a single entity, with opportunities to provide bundles to its extensive base of local customers,” said Friedman Billings Ramsey.
One think tank warned the deal could be subject to exploitation by special interest groups.
“This transaction has appeared inevitable and desirable for broadband consumers, particularly in the South. The only surprise is that it happened so quickly,” said Ray Gifford, president of Progress & Freedom Foundation and former chairman of the Colorado Public Utilities Commission. “The Department of Justice will look at the competition policy issues rigorously, but at first glance the merger appears to present no great problems. This is a horizontal merger between companies with no overlapping territories or assets. On the wireless side, it is simply a majority owner buying out the minority interest. To be sure, every rent-seeker and special interest will come hat-in-hand to the government seeking special conditions and taxes on this merger, but from a pure competition standpoint it would appear to offer a combined entity that is better capable of building out broadband to consumers.”
In response to the merger announcement by AT&T and BellSouth, Chairman Kevin Martin said, “I look forward to working with my colleagues on the Commission to review the applications expeditiously once they are filed. The FCC’s primary responsibility is to determine whether the proposed transaction is in the best interest of consumers. We will carefully weigh the information presented, examining any allegations of specific harm in individual markets and the potential benefits for the deployment of new services.”
