By Gautham Nagesh - 08/24/11 08:03 PM EDT
The Federal Communications Commission is pressing AT&T to provide documentation substantiating its claim that the proposed $39 billion merger with T-Mobile USA is vital to the firm's plan to deploy next-generation wireless coverage nationwide.
At the heart of the matter is AT&T's pledge to deploy fourth-generation mobile broadband to 97 percent of the country, should the FCC and Justice Department approve the deal. The firm has relied heavily on the promise to connect rural consumers to help sell the deal.
"Specifically, we understand that AT&T's senior management concluded the transaction would improve the likely return on the additional LTE deployment to create a business case for this deployment where one would not exist absent the transaction," Hesse wrote.
"Although AT&T has stated that it has not quantified the transaction-related changes in the business case for extending its LTE footprint, we ask that you supplement your filing with any documents or analyses explaining why the changes in cost, revenue, and/or profitability are likely to be large enough to change the overall business case for the additional deployment," Hesse wrote.
AT&T senior executive vice president Jim Cicconi told The Hill last week that the spectrum and scale of operations would allow AT&T to expand its current plan to deploy the network to just 80 percent of the population.
Cicconi said AT&T simply cannot and will not invest the necessary $8 billion to deploy 4G coverage nationwide if the merger isn't approved. AT&T would have to pay T-Mobile $3 billion if the deal were to be blocked by the government.
“Requests from the FCC staff for additional information are to be
expected given the detailed review they are undertaking," said an AT&T spokesman.
"We look forward to providing the commission with this additional information, which will further confirm that we would not be able to deliver 4G LTE to 55 million more Americans without our merger with T-Mobile.”
The documentation is likely to play a crucial role in the review, which is to determine whether the transaction is in the public interest. Opponents argue the merger would ultimately harm consumers and leave the national wireless market as a duopoly, stifling innovation.
Hesse emphasized that the request is not limited to documents that reached a certain level in the firm's hierarchy. AT&T's broadband deployment pledge is the most frequently cited reason for supporting the deal, just ahead of the firm's unionized workforce.