Bloomberg News

AT&T Antitrust Hearing May Offer Settlement Clues, Trial Date

September 21, 2011

Sept. 21 (Bloomberg) -- Lawyers for AT&T Inc. and the U.S. will spar over a trial date and may offer clues on a possible settlement as they appear in court for the first time since the government sued to block the company’s merger with T-Mobile Inc.

Today’s hearing before U.S. District Judge Ellen Segal Huvelle in Washington is intended to set a schedule for moving the antitrust case toward a trial, which could begin as early as January if AT&T gets its way. Huvelle also ordered both sides to be prepared to discuss the prospects for settlement.

“It will be very interesting to see how strongly the government responds,” said Andrew Gavil, who teaches antitrust law at Howard University School of Law in Washington. “Do they leave the door open or do they shut it firmly? What kind of sign do they want to send the judge about a negotiated resolution?”

AT&T may use the hearing to argue that the government isn’t considering all of its proposals, such as asset sales, that in its view might remedy the antitrust concerns raised by the deal, Gavil said. The aim would be to enlist Huvelle in pressing the Justice Department to ease its stance that the transaction must be blocked, he said.

Huvelle could decide today when the case goes to trial should settlement talks fail. AT&T is pushing for Jan. 16 while the U.S. proposed March 19. The $39 billion T-Mobile transaction is scheduled to close by March 20, though that deadline can be extended, according to company filings.

‘Last for Months’

“It would be a trial that could last for months and it will be a full-time job for the judge,” said Bob Doyle, a partner at Doyle, Barlow & Mazard PLLC in Washington and a former official at the Federal Trade Commission.

AT&T Chief Executive Officer Randall Stephenson in March announced the proposed purchase of Bellevue, Washington-based T-Mobile, a unit of Deutsche Telekom AG. If the transaction falls apart, AT&T may be liable to pay Deutsche Telekom $3 billion in cash, to give T-Mobile USA wireless spectrum, and to reduce charges for calls into AT&T’s network.

The Justice Department sued Dallas-based AT&T and Bonn- based Deutsche Telekom AG’s T-Mobile unit on Aug. 31, saying a combination of the two companies, which would make AT&T the biggest U.S. wireless carrier, would “substantially” reduce competition. Last week, seven states joined the government’s case against the deal.

Two-Track Approach

AT&T has taken a two-track approach to the case. It’s challenging the government’s evidence that the deal would lead to higher prices, less product variety and poorer quality in services, while exploring compromises for asset sales that might satisfy the government’s concerns. The company has reached out to MetroPCS Communications Inc. and Leap Wireless International Inc. to gauge their interest in buying assets, according to two people with direct knowledge of the situation.

Of almost two dozen lawyers who have filed to appear in the case, 13 of those are representing AT&T and T-Mobile.

Sprint Nextel Corp., the third-biggest U.S. wireless operator, and Ridgeland, Mississippi-based Cellular South Inc., the ninth-largest by customers, filed their own antitrust lawsuits seeking to block the deal.

Neither has asked that the cases be consolidated with the government’s. Overland Park, Kansas-based Sprint, which claims the deal would weaken its ability to compete with AT&T and Verizon Communications Inc., asked Huvelle to be included in coordinated proceedings with the Justice Department case, as well as in motions about handling confidential evidence and scheduling.

Sprint’s Participation

Huvelle hasn’t ruled on Sprint’s request. Still, the company was invited by the Justice Department -- at Huvelle’s request -- to participate in today’s hearing, according to court documents filed by Sprint.

David Smutny, an antitrust partner at Orrick Herrington & Sutcliffe LLP in Washington, said Huvelle may signal at today’s hearing how much involvement Sprint and Cellular South will have in the Justice Department’s case.

While Huvelle could decide to join those cases with the Justice Department’s, judges usually have related cases move along on a “parallel track,” he said.

“Their complaints are similar, but not identical so I could see the judge going either way,” Smutny said.

A merged AT&T and T-Mobile would have about 132 million connections to mobile wireless devices and more than $72 billion in mobile wireless telecom service revenue, the U.S. said in its complaint.

The case is U.S. v. AT&T Inc., 11-cv-01560, U.S. District Court, District of Columbia (Washington).

--With assistance from Sara Forden in Washington. Editors: Fred Strasser, Peter Blumberg

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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