Senator says AT&T/T-Mobile deal will cause "substantial harm" if approved [UPDATED]

Alex Wagner
Editorial Director of News and Content from  Omaha, NE
| Published: July 20, 2011

Senator Herb Kohl

AT&T's proposed acquisition of T-Mobile has garnered quite a few opponents since it was announced back in March, most notably Sprint CEO Dan Hesse, and today another major adversary of the deal voiced his opposition. Senator Herb Kohl, chairman of the Senate antitrust committee, has written a letter to the FCC urging it to block AT&T's buyout of T-Mobile. In his letter, Kohl claims that the deal "would likely cause substantial harm to competition and consumers, would be contrary to antitrust law and not in the public interest, and therefore should be blocked by your agencies." The senator went on to say that AT&T and T-Mobile are direct competition and that, if the buyout is approved, T-Mobile and its low-cost offerings would be eliminated, leaving just three national carriers. AT&T issued a statement responding to Kohl's letter, which you can find below:

"We respect Senator Kohl. However, we feel his view is inconsistent with antitrust law, is shared by few others, and ignores the many positive benefits and numerous supporters of the transaction."

This isn't the first time that Senator Kohl has been critical of the AT&T-Mobile deal; back in May when the buyout was brought in front of the Senate Judiciary Committee, Kohl said that has "profound implications," including higher prices for consumers. AT&T has remained bullish about the deal's chances of getting approved, which it expects to happen by Q1 2012.

UPDATE: The Communication Workers of America today issued a response to Senator Kohl's letter concerning the AT&T/T-Mobile deal, pointing out why it believes that the acquisition should be approved and the benefits that a combined AT&T/T-Mobile entity could offer. Additionally, Utah Senator Mike Lee voiced his support for the AT&T's proposed acquisition of T-Mobile. Both statements are below:

CWA: AT&T/T-Mobile Merger Should Be Approved on its Merits
Washington, D.C. -- The Communications Workers of America respectfully disagrees with Senator Herb Kohl's assessment of the proposed merger of AT&T and T-Mobile.
First, the reality of the telecommunications industry today is that there is no future for a stand-alone T-Mobile USA.
T-Mobile has been losing market share and customers, and has experienced declining profits and revenue since 2008. Its own CEO made clear in testimony before a United States Senate subcommittee that there would be no further investment in T-Mobile USA that would enable the company to provide the 4G service that is necessary to be competitive in this industry. T-Mobile was up for sale.
Second, of the possible buyers, Sprint and AT&T, Sprint would be a disaster for workers and consumers. Sprint, unlike other major companies, contracts out network management work. It also outsources or offshores a majority of customer service and other jobs. That's bad news for T-Mobile USA workers. Sprint has not yet integrated its purchase of Nextel; adding T-Mobile to that mix means four separate operating systems that are unlikely to be integrated. That offers nothing to consumers.
Finally, it's important not to confuse national service plans with local markets. Both the Federal Communications Commission and the Department of Justice use as the standard for review the local market for mobile telephony/broadband services. Products and services are available to consumers locally and it's on that basis that wireless mergers have been reviewed. That standard should continue.

CWA believes that the benefits of this merger: a buildout of high speed wireless broadband to reach another 55 million Americans, increased spectrum and service to AT&T and T-Mobile customers and a company that respects workers' right to make a free choice about union representation - are powerful reasons for its approval.

Lee: Merger Deserves Careful Review
WASHINGTON - Today, Senator Mike Lee released the following statement regarding the proposed AT&T/T-Mobile merger:
"The mobile phone market is a critical component of our nation's economy and the proposed merger between AT&T and T-Mobile deserves careful review.  In my view, the merger has the potential to provide significant network efficiencies that may help alleviate capacity constraints, enable enhanced service quality, and facilitate expansion of a 4G LTE nationwide network, which would in turn create opportunities for handset innovation and continued development of data-rich applications.
"I have confidence that the Department of Justice and Federal Communications Commission will take steps to ensure that the market remains competitive and that regional carriers continue to enjoy access to popular handsets and roaming arrangements on the nationwide networks."

UPDATE 2: T-Mobile has also responded to Senator Kohl's stance on the deal:

“We are disappointed to learn of the position taken by Sen. Kohl on the proposed merger between AT&T and T-Mobile USA. While we have a great deal of respect for Sen. Kohl, we strongly disagree with his analysis of this transaction, which will bring significant benefits to American consumers. The proposed merger is currently being carefully scrutinized by the Department of Justice and the FCC, and we are confident that the review process will demonstrate that the merger is fully consistent with the antitrust laws and significantly advances the public interest.”

Via MobileBurn (1), (2), Reuters