WASHINGTON-Cingular Wireless L.L.C. moved a step closer to winning government backing for its proposed $41 billion purchase of AT&T Wireless Services Inc., with Federal Communications Commission Chairman Michael Powell signing off on the deal and setting in motion the possible start of a political tug-of-war over how regulatory approval should be structured.
It is unclear whether Powell, a Republican and a former antitrust lawyer at the Justice Department, attached any strings to a vote for the merger or whether the other four FCC members will seek to do so. There is a strong expectation that Cingular Wireless-60-percent owned by SBC Communications Inc. and 40-percent owned by BellSouth Corp.-could be forced to divest wireless assets in some top markets where the combined spectrum holdings of the No. 2 and No.3 wireless carriers are substantial.
SBC signaled such a move would not sit well with the San Antonio-based telephone company.
“I don’t think we should have to divest anything,” said Edward Whitacre, president and chief executive of SBC, in an interview with Bloomberg TV last week.
The Cingular-AT&T Wireless merger needs approval of the FCC and Justice Department. But the two agencies may not see eye to eye on the merger.
Sources said some FCC officials were surprised when the Justice Department notified them of its merger decision. The speculation is Justice may have decided to impose far fewer merger conditions than the FCC.
Whitacre disputed that a Cingular-AT&T Wireless combo would have too much market power in markets such as Dallas, Atlanta, San Antonio, San Francisco and Miami. “I don’t think so,” he said. There are five, six major competitors in all those areas now-big companies, not small companies, companies as large or larger than Cingular.”
Whitacre did not say whether he would challenge the U.S. government if directed to sell wireless assets as a condition of merger approval. “I’m not privy to the Justice Department or FCC orders, so I don’t what it says,” said Whitacre. “They don’t show us that. … So, I guess we’ll just have to see what the deal is and then make a decision.”
While Powell and apparently the Justice Department have finished their reviews of the merger, the other FCC commissioners have just begun to analyze the deal. As such, the merger is entering a phase that is ripe for controversy.
Sources said commissioners Kevin Martin, a Republican who has clashed with Powell, as well as the two Democrats on the FCC-Michael Copps and Jonathan Adelstein-are expected to scrutinize the Powell draft to ascertain how it addresses rural roaming, wireless-wireline competition and other matters raised in the proceeding.
If the three commissioners dislike Powell’s treatment of hot-button issues, sources predict a fight will break out on how the Cingular-AT&T Wireless merger order is written and what conditions, if any, should accompany FCC approval.
Should the merger ultimately be approved in the next few weeks, which is expected, the bigger question may be whether Cingular’s conquest of AT&T Wireless will end up being a Pyrrhic victory.
Whitacre said there is a risk of losing tens of thousands-but not millions-of customers to wireless rivals-such as No. 1 Verizon Wireless-due to the upheaval of the merger. Whitacre said there is a detailed strategy for combining the two wireless companies, including integrating towers, spectrum, retail stores, work force and management. “It will be quite a task,” he said. Whitacre would not say whether the merger would trigger layoffs.
Whitacre said Verizon Wireless is the best carrier in the business right now, but that is only a temporary state of affairs.
