WASHINGTON-The decision whether to approve the proposed $62 billion merger between SBC Communications Inc. and Ameritech Corp. could be driven as much by politics as by antitrust scrutiny, judging from the hostile reception the deal received here last week.
The announcement of the deal, which would eclipse in value WorldCom Inc.’s proposed $37 billion acquisition of MCI Communications Inc., sparked angry reactions from lawmakers, consumer advocates and a major civil-rights activist.
“Bigger is not necessarily better,” said Rev. Jesse Jackson, head of the Rainbow/Push Coalition. “Consumers demand value for their telecommunications dollar, and they are unlikely to realize any value from the proposed Ameritech-SBC merger.”
The White House, responding to the recent wave of mega-mergers, announced last week that the National Economic Council will conduct a review of concentration in the telecommunications industry and in other business sectors.
Even if the proposed SBC-Ameritech merger can pass antitrust muster, the Justice Department and the Federal Communications Commission will be under enormous political pressure to reject it.
James Olson, an antitrust lawyer formerly at the FCC, said he expects “a very intensive review” of the proposed merger.
Olson likened the deal to that between Bell Atlantic Corp. and Nynex Corp. He said while the two Baby Bell wireline markets do not overlap, it is possible antitrust arguments could be raised regarding the potential-actual or perceived-for chilling competition from prospective local service providers.
The FCC’s 45-megahertz spectrum cap will force the divestiture of some broadband wireless holdings since SBC and Ameritech have cellular and personal communications services licenses in the same markets.
Popular sentiment could turn against the deal, too, in view of rising local rates and a USA Today report last week that Ameritech Chief Executive Officer Richard Notebaert, former head of Ameritech’s wireless unit, would net nearly $45 million if the merger goes through.
There was more than a hint of reservation in the responses of one of the two regulators who will review the blockbuster transaction, a deal that spells further consolidation of the wireless telecom industry.
“The bottom line question is: Is this merger going to create competition, or will it be a nonaggression pact?” said Bill Kennard, chairman of the FCC.
“The telecom act was all about opening markets for competition,” Kennard stated. “SBC and Ameritech must show us that this merger will serve the public interest and enhance competition.”
Gene Kimmelman, co-director of Consumer Union here, believes the deal should not be approved. “These are companies that should have been forced to compete,” he said.
Likewise, Rep. Edward Markey (D-Mass.), ranking minority member of the House telecommunications subcommittee, said the proposed SBC-Ameritech merger “is bad for consumers, bad for competition and bad for innovation and job growth in the telecommunications industry.”
Joel Klein, chief of the Justice’s antitrust division, was more circumspect about the deal than Kennard.
“It is a serious and important matter, and we will give it full and thorough consideration on the merits of the merger,” said Klein.
Klein, saying he does not believe the telecom act needs a rewrite but that it will take a long time for local competition to develop fully, was criticized for approving the Bell Atlantic-Nynex and the SBC-Pacific Telesis Group mergers without conditions.
