Bloomberg News

AT&T May Face Judge’s Questions on Plans for T-Mobile Purchase

December 22, 2011

Dec. 9 (Bloomberg) -- AT&T Inc. may be questioned at a federal court hearing in Washington on whether it plans to move ahead with its proposed $39 billion purchase of T-Mobile USA Inc. in the face of growing resistance from U.S. regulators.

AT&T will appear in U.S. District Court today for the first time since the company withdrew its application to the Federal Communications Commission seeking approval for the deal. The company said it abandoned the FCC bid after the agency signaled it might try to block it to focus on winning clearance from the Justice Department or revising its proposal.

Today’s hearing in the Justice Department’s lawsuit to stop the T-Mobile takeover was called by U.S. District Judge Ellen Segal Huvelle as she seeks to ensure both sides will be ready for trial on Feb. 13. Huvelle will also assess the status of lawsuits by Sprint Nextel Corp. and Cellular South Inc., which are separately trying to block the transaction.

“The Justice Department may try to persuade the judge to press AT&T to take a position on whether it still plans to move forward,” said Andrew Gavil, an antitrust professor at Howard University School of Law in Washington. “They may say ‘We think this deal is dead and we shouldn’t be litigating a case that, in effect, is moot.’”

The retreat from review by the FCC, which would have to approve the merger, has led opponents of the deal to challenge the legitimacy of AT&T continuing to defend itself in court.

AT&T Subpoena

Earlier this week, LightSquared Inc., a wireless broadband company, asked the court to block AT&T’s subpoena seeking testimony from company officials on its business plans, arguing in court papers that without a pending FCC application, AT&T has no path to complete the merger and the Justice Department lawsuit might be irrelevant. LightSquared was brought into the case as a competitor as AT&T seeks to counter allegations the T- Mobile deal is anticompetitive.

LightSquared said comments by Jim Cicconi, AT&T’s senior executive vice president of external and legislative affairs, supported its position.

Cicconi said on AT&T’s website on Nov. 29 that a company might withdraw an FCC merger application for two reasons: Either it intends to abandon the transaction or it plans to submit a new application “reflecting changes to the transaction or materially changed circumstances.”

Jennifer Giordano, a lawyer for LightSquared, wrote in court filings, “AT&T’s public statements suggest that the transaction as currently structured may be substantially altered or not proceed at all.”

‘Changed Circumstances’

A lawyer for AT&T wrote to Giordano that a court victory would constitute “materially changed circumstances” that would be submitted to the FCC, according to court filings.

Huvelle’s special master, Richard Levie, said in his ruling on LightSquared’s request that the Justice Department interpreted Cicconi’s comments to mean “the current litigation may, in fact, not present a live case or controversy.”

Still, Levie ordered the deposition go ahead, saying that while the FCC withdrawal “raises the specter of an alteration of the course of the proposed merger” it didn’t change the status of the litigation.

“Although FCC approval is necessary for the proposed merger, so, too, is a favorable ruling from the federal court in this case,” Levie said in the Dec. 6 decision.

Michael Balmoris, a spokesman for AT&T, declined to comment on the company’s trial strategy. Gina Talamona, a Justice Department spokeswoman, declined to comment on what the agency’s lawyers plan to say at today’s hearing.

Case on Hold

Under federal law, Huvelle has the authority to put the case on hold until a decision from the FCC is rendered, said Herbert Hovenkamp, a professor and antitrust expert at the University of Iowa College of Law.

“Usually the court, which is of general jurisdiction, would defer to the agency that is considered to have more expertise,” Hovenkamp said. “The agency can produce fact findings that could inform the antitrust court down the road.”

The Justice Department sued Dallas-based AT&T and Deutsche Telekom AG’s T-Mobile unit on Aug. 31, saying a combination of the two companies would “substantially” reduce competition. Seven states and Puerto Rico joined the effort to block the deal, which would make AT&T the biggest U.S. wireless carrier.

Sprint, the third-biggest U.S. wireless carrier, filed its antitrust lawsuit on Sept. 6, saying the proposed merger would weaken its ability to compete with AT&T, the second-biggest, and Verizon Communications Inc., the market leader.

Less Competition

Cellular South, based in Ridgeland, Mississippi, sued on Sept. 19, claiming the merger threatened to “substantially” cut competition.

Huvelle last month dismissed several claims in the suits by Overland Park, Kansas-based Sprint and Cellular South. She limited the cases to Sprint’s allegations regarding access to mobile devices and Cellular South’s complaints regarding roaming fees as well as devices.

No trial has been set for the Sprint and Cellular South cases. The parties agreed it should take place after the trial of the government’s case.

The government’s case is U.S. v. AT&T Inc., 1:11-cv-01560; Sprint’s case is Sprint Nextel Corp. v. AT&T Inc., 11-cv-01600; and Cellular South’s case is Cellular South Inc. v. AT&T Inc., 1:11-cv-01690, U.S. District Court, District of Columbia (Washington).

Editors: Fred Strasser, Stephen Farr

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

To contact the editor responsible for this story: Fred Strasser at fstrasser@bloomberg.net


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