Two wireless deals cleared major hurdles last week, but not before strings were attached by government antitrust and regulatory officials.
The Justice Department said AT&T Inc. agreed to sell assets in seven rural markets and forgo rights to the Cellular One brand to win approval of the company’s $2.8 billion purchase of Dobson Communications Corp.
“The required divestitures will preserve competition for residents in rural areas in Kentucky, Oklahoma, Missouri, Pennsylvania and Texas and ensure that these consumers continue to enjoy the benefits of competition, such as lower prices and higher quality,” said Thomas Barnett, assistant attorney general in charge of the department’s antitrust division. AT&T Mobility is the largest cellphone carrier in the United States.
The Justice Department had filed in federal court a lawsuit to block the deal and a proposed consent decree. The consent decree addresses the department’s antitrust concerns, which would allow the transaction to go forward under those conditions. A U.S. district judge has to approve the decree.
The department said the “divestiture of the Cellular One brand and associated rights will ensure continued competition in two markets in Pennsylvania and Texas where a Cellular One licensee is the primary wireless competitor to AT&T. Without the divestiture, AT&T would have had the incentive and ability to harm competition by limiting and eliminating the Cellular One licensee’s ability to use the brand effectively.”
This is the second time in recent history that the Cellular One brand was forced to change hands. The name was previously owned by Western Wireless Corp., which was required to divest the name following its acquisition by Alltel Corp. Dobson acquired the name in late 2005 for $1.3 million.
The DoJ coordinated the review of the wireless deal with the Federal Communications Commission, which is expected shortly to approve the transaction with the same conditions.
Dobson Communications, based in Oklahoma City, is a major rural carrier that operates in more than 60 wireless markets in 17 states and serves 1.6 million subscribers. It also holds the distinction of being the largest cellular service provider in Alaska. Dobson said the West Virginia Public Service Commission and Arizona Corporation Commission have cleared the deal. The company said it hopes to close the deal after the FCC acts.
Alltel goes private
Meantime, the FCC approved the $27.5 billion acquisition of Alltel Corp. by private-equity firms TPG Capital L.P. and the Goldman Sachs Group Inc., despite criticism by several members over linked universal service and enhanced 911 conditions.
Atlantis Holdings L.L.C. is the holding company for TPG Capital and Goldman Sachs. While the FCC concluded the transition would not harm mobile-phone service competition, it set special requirements to address concerns about universal service and E-911. As such, the FCC imposed an interim cap on high-cost, competitive eligible telecommunications carrier support-based on 2007 levels-provided to Alltel as a condition to approval of the deal even though the agency has yet craft a universal service reform policy.
But there’s an escape clause to the universal service condition: E-911 compliance and filing certain universal service support data.
“The condition being imposed in today’s merger is even more piecemeal than what the [Federal State] Joint Board recommended in May. I fear that the condition will be an even greater hindrance to rational, comprehensive USF reform,” stated Commissioner Michael Copps.
Fellow Democrat Jonathan Adelstein also criticized the crafting of the restrictions on the Alltel-Atlantis deal.
“The order curiously requires that Alltel immediately meet E-911 public safety answering point-level compliance as a condition precedent for exemption from the freeze on Alltel’s level of universal service support,” Adelstein said. “This ‘Jack in the Box’ surprise requirement that suddenly sprung up appears as an illogical afterthought. It is unclear to me how Alltel might fulfill this condition, given that the commission currently has an open proceeding addressing the details of how carriers must implement PSAP-level accuracy.”
Commissioner Robert McDowell, who helps comprise the three-member GOP majority at the FCC, said the conditions seem to prejudge future actions on major telecom issues.
“The conditions imposed today raise more questions than they answer,” said McDowell. “Given the ongoing nature of the universal service and E-911 proceedings, I wonder whether this is an attempt to bind future commission action, and dictate or bind government policy.”
