Joint Review of AT&T Purchases Won’t Doom T-Mobile Deal, Analysts Say
The FCC’s coordinated treatment of AT&T’s proposed purchase of Qualcomm spectrum and T-Mobile USA doesn’t necessarily indicate the later deal is in trouble, analysts told us. The commission will review both purchases in a “coordinated manner” and suspended its informal 180-day clock of its review of AT&T’s $1.9 billion offer for Qualcomm’s 700 MHz spectrum. That’s according to an FCC letter to AT&T and Qualcomm late Monday.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
FCC Chairman Julius Genachowski was asked about the AT&T/Qualcomm shot clock at the commission meeting Tuesday, but declined to give specific answers. “Obviously, we're assigned important responsibilities by Congress in reviewing transactions,” he said. Asked whether AT&T’s proposed takeover of T-Mobile was “in trouble,” Genachowski said: “As I've said before, the transaction presents a number of serious issues. We'll do a thorough and serious review of the transaction.”
The decision doesn’t mean the agency is formally consolidating the proceedings, an FCC official told us in response to our request for comment. “In fact, should circumstances change, we retain the flexibility to conclude our reviews independently.” The FCC’s review has confirmed that the proposed transactions raise related issues, including questions regarding AT&T’s aggregation of spectrum, particularly in overlapping areas, he said. The letter doesn’t take any formal action other than to be transparent about how the commission is proceeding with the two transactions, he said. “At day 180 of our informal merger review timeline, we thought it important to give AT&T and Qualcomm a better understanding of where the review process stands.” The Qualcomm transaction stands on its own merits, AT&T said. “We are pleased that the Commission has rejected calls to officially consolidate the two deals and has expressly preserved the ability for the Qualcomm application to be resolved in advance of the T-Mobile application. We remain confident that the FCC will approve the license transfers as consistent with the public interest.”
The coordinated treatment doesn’t necessarily portend any particular outcomes, though such handling could have implications for AT&T/T-Mobile conditions if policymakers ultimately decide not to block the deal, said analyst Jeff Silva of Medley Global Advisors. The implications on conditions could include the quantity of spectrum assets AT&T might be required to divest, he said. It’s not surprising the FCC wants to handle the two transactions on parallel tracks, especially given the significant stakes in the larger of the two deals and that spectrum acquisition by one of two largest wireless operators is the common denominator in each, he said. The regulator might have unofficially linked the two reviews long before the letter, he said. The agency might have felt obligated to make official its treatment of the two transactions once the review of AT&T/Qualcomm reached the 180-day mark, he said. “Federal regulators by this point have a better grip on AT&T/T-Mobile than they did when the process question first arose with respect to both transactions.”
It’s understandable that the FCC would look at the Qualcomm spectrum purchase in the context of the AT/T-Mobile deal, but “I'm not sure why that would result in a further delay of the decision of” AT&T/T-Mobile, said analyst Walter Piecyk of BTIG. “It’s simply another chunk of spectrum to consider.” While the FCC isn’t formally consolidating the two reviews, it is putting them on parallel tracks, which means it is unlikely to decide on the AT&T-Qualcomm deal until it decides on AT&T/T-Mobile, or close to it, Stifel Nicolaus analysts said. The latter decision could come in Q4, or it could extend into next year, they said.
The decision could interest state attorneys general that are reviewing the merger, and most likely the California Public Utility Commission, said a state regulatory analyst who doesn’t think AT/T-Mobile is in trouble. The FCC is clear that it’s not consolidating the two reviews but is simply stopping the clock for another 180 days, she noted. The agency might use this time to decide how to consolidate the reviews, she said.
Groups opposing the T-Mobile purchase praised the move. “This is a significant development in the proposed AT&T/T-Mobile merger,” said Rural Cellular Association President Steve Berry. He’s urged the FCC to consolidate into one proceeding other AT&T spectrum acquisitions that are pending (CD June 24 p1). Coordinated treatment would give the FCC a more complete review of AT&T’s spectrum holdings, said a Public Knowledge spokesman.