New FCC Pressure on AT&T Threatens T-Mobile, Qualcomm Acquisitions

by Anthony John Agnello | August 9, 2011 11:38 am

If AT&T (NYSE:T[1]) is allowed to merge with Deutsche Telekom’s T-Mobile USA, the new AT&T will command a mobile phone subscribership of 130 million users. That’s around 24 million more subscribers than Verizon (NYSE:VZ[2]), nearly three times Sprint‘s (NYSE:S[3]) entire subscriber base, and more than 14 times larger than telecoms[4] that offer lower-cost services like MetroPCS (NYSE:PCS[5]).

The sudden growth and dominance the company would hold over one of the country’s true booming industries is of some concern to the Federal Trade Commission. While the FTC still is only keeping an eye on the merger, the Federal Communications Commission is in the midst of a full-blown investigation. That investigation intensified Monday and represents a very real threat to AT&T’s grand plans.

It’s not just the portion of consumer dollars that AT&T suddenly will control that’s staggering, but also the width of its resulting hold on the U.S. wireless spectrum. AT&T would hold new sway over the 1700 MHz and 2100 MHz bands used by T-Mobile for its 3G and “4G”[6] smartphones. This is in addition to AT&T’s proposed $2 billion purchase of spectrum on the 700MHz band[7] from Qualcomm (NASDAQ:QCOM[8]), which was using it for the FLO TV mobile streaming video service (yet another booming business).

It’s this reach of AT&T’s possible new influence on the U.S. airwaves that has the Federal Communications Commission concerned. To that end, the FCC has decided to make a merger of its own, combining its investigations into both the T-Mobile and Qualcomm acquisitions in the consideration of AT&T as a dangerous trust.

Investors weren’t especially troubled by the news. AT&T actually was up Tuesday morning after falling below $28 per share before Monday’s market close. Consumers without a stake in the company should feel encouraged by the FCC’s decision, though. As cited in GigaOM‘s report on the FCC announcement[9], AT&T’s collective power after Qualcomm and T-Mobile acquisitions could have devastating effects on the average mobile subscriber. Subscription fees in six major cities could grow by $35, according to research firm Yankee Group. Verizon will be under greater pressure to compete with the company than it has been to date, but all other competitors — Sprint, MetroPCS and Leap Wireless (NASDAQ:LEAP[10]) — will be crushed as two behemoths try to outprice one another.

With the FCC and — possibly, depending on the results of its new single investigation — the FTC breathing down AT&T’s neck, how likely is it that both acquisitions will go through? It’s still too early to say. The FCC has gone out of its way[11] in the past three years to keep the 700MHz frequency open even as businesses increasingly use it for mobile services. Even if AT&T consumes T-Mobile, there’s guaranteed to be a significant amount of subscriber churn during the transition, meaning there’s by no means a guarantee it will control 130 million monthly mobile plans across the country.

That the FCC is recognizing the combined threat of AT&T’s plans at all, however, means that the likeliest scenario is the telecom might get some of what it wants, but not all of it.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello[12] and become a fan of InvestorPlace on Facebook[13].

Source URL: https://investorplace.com/2011/08/fcc-att-t-mobile-qualcomm-deals/

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