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Justice Department Signs Off on Proposed AT&T Wireless-Cingular Merger

Posted on: Tuesday, 26 October 2004, 14:00 CDT

Oct. 26--The Justice Department approved the $41 billion merger of Cingular and AT&T Wireless on Monday, pushing the companies one step closer to being the nation's largest wireless service provider.

The merger is awaiting the Federal Communications Commission's approval, which insiders believe will occur this week.

As a condition of approval, the Justice Department is requiring Cingular to sell some of its assets in Texas and 10 other states. In the Metroplex, the new company would need to divest 10 megahertz of AT&T Wireless spectrum.

Without the divestiture, "the combination of Cingular and AT&T Wireless would result in higher prices and reduced innovation for consumers of mobile wireless services," the Justice Department said.

If the merger is approved, the combined entity will have about 47.6 million customers and licenses to operate in 49 of 50 states.

"Today's action by the department ensures that consumers of mobile wireless services will continue to benefit from competition," R. Hewitt Pate, who oversees the department's Antitrust Division, said in a statement.

Cingular is jointly owned by BellSouth Corp. and SBC Communications.

Frank Merriman, a Cingular spokesman, said Metroplex customers will not feel the effects of the spectrum divestiture. Operations and facilities will also not be affected by the requirement.

Divesting spectrum means the company gives up licenses for federally allocated radio wave space. Radio waves carry cellphone signals.

The Justice Department said AT&T Wireless will have to divest businesses including customer contracts and spectrum in other Texas cities and counties. Such cities as Nacogdoches and Lufkin will close AT&T Wireless business, but Angelina and St. Augustine counties will be able to keep spectrum.

Before the merger announcement, AT&T Wireless was the nation's third-largest wireless service provider with about 22 million customers, and Cingular was the second largest with about 25 million. The companies await the approval of the Federal Communications Commission, which has coordinated its review with the Justice Department.

Lauren Patrich, an FCC spokeswoman, said she expects a decision to be announced within the next few days. The FCC oversees the allocation of spectrum in nationwide markets.

"In most markets the potential benefits outweigh concerns, but that is in most markets," she said. " However, in some markets a merger could cause competitive harm, where prices could go up and quality go down."

Patrich said a wireless company divesting spectrum as part of a merger agreement is not uncommon, but this is the first involving nationwide players.

The Justice Department's decision was also based on both companies' wireless broadband offerings, a service that provides wireless Internet service at five times the current speed. In a number of markets, AT&T Wireless and Cingular were two of a handful of companies offering the service.

Will Power, a wireless analyst with Robert W. Baird & Co., said it's no surprise some type of divestiture was necessary.

In the Metroplex, the combination of Cingular and AT&T Wireless accounted for more than half the market share, he said.

"Because spectrum is a limited resource, the federal agencies just want to make sure the playing field is evenly spread," Power said.

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(c) 2004, Fort Worth Star-Telegram, Texas. Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

BLS, SBC, AWE, DCM, 9437,

Source: Fort Worth Star-Telegram (Fort Worth, Texas)

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