Further scrutiny for AT&T’s T-Mobile bid

Further scrutiny for AT&T’s T-Mobile bid

More storm clouds have gathered over the prospective acquisition by AT&T of the American assets of German mobile operator T-Mobile as regulators probe for further information on the deal.

The Federal Communications Commission has asked AT&T for details on the rationale for its bid following the accidental public disclosure that it could have extended its own cellular services for a fraction of the T-Mobile purchase price.

At the heart of the FCC’s concerns is the issue of whether the $39bn deal would result in enough benefit to consumers to outweigh worries about the limitation of competition. AT&T has already filed a number of responses to the FCC on the issue of competition earlier in the summer.

AT&T’s counter-argument on the issue of reduced competition is that only with T-Mobile’s network added to its own can it profitably deliver next generation LTE services to 95% of American cellular service customers. It has claimed that the added reach given by T-Mobile will let it spread the benefits of LTE well outside the main urban centres of the US and into rural areas.

An accidentally released document sent confidentially by AT&T to the FCC now suggests that AT&T had considered and thrown out a strategy of single handedly expanding its LTE network to 97% of the US at a cost of $3.8 billion – about a tenth of the T-mobile acquisition price. This accident appears to be behind a fresh round of FCC investigation, which is now unlikely to be completed before the first quarter of 2012.

If successful, the acquisition would combine the second and fourth largest mobile carriers in the US resulting in a new market leader ahead of current number one Verizon Wireless.