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Feds Approve Big Wireless Merger

The Federal Communications Commission gave its approval Tuesday to Cingular Wireless LLC's $41 billion acquisition of AT&T Wireless Services Inc., completing the federal regulatory blessing necessary for creation of the country's largest cellphone company.

Antitrust regulators at the Justice Department had cleared the way for the merger on Monday.

"Without these divestitures, wireless customers in these markets would have had fewer choices for their wireless telephone service and faced the risk of higher prices, lower quality service and fewer choices for the newest high-speed mobile wireless data services," said R. Hewitt Pate, assistant attorney general for the Justice Department's antitrust division.

Both agencies, however, set conditions for the merger that would give Atlanta-based Cingular about 47.6 million subscribers. That would top Verizon Wireless, the current market leader with 40.4 million customers as of midyear, while paring the number of national cell phone providers to five.

The FCC will require the agency to divest assets in 22 markets in at least eight states. Among them: Oklahoma, Kentucky, Arkansas and Texas.

Under the agreement with the Justice Department filed in federal court in Washington, Cingular must divest itself of the new combined company's assets in 11 states. The settlement requires the merged company to divest assets in parts of Connecticut, Georgia, Kansas, Kentucky, Louisiana, Massachusetts, Missouri, Michigan, Oklahoma, Tennessee and Texas. These assets include wireless services businesses and radio wave spectrum licenses.

Cingular is a joint venture between BellSouth Corp. and SBC Communications Inc. Combined, Cingular and AT&T Wireless have about 70,000 employees, although layoffs are expected.

Stan Sigman, Cingular president and chief executive officer, said the new company would provide wireless services in 49 states and the 100 top metropolitan areas. AT&T Wireless officials deferred comment to Cingular.

"We hope the merger process will continue to progress in an orderly and expeditious fashion," Sigman said. "This merger will create a premier provider that is very well-equipped to meet the most demanding needs of wireless customers today and in the future."

Two opponents of the deal — Consumers Union and the Consumer Federation of America — said the settlement does not do enough to protect consumers. They said the new company will have no incentive to compete against BellSouth and SBC in parts of the country where they overlap.

"This merger will have a devastating impact on consumers, who may have to pay more and may not receive the same level of service they currently enjoy," said Mark Cooper, director of research at Consumer Federation of America. "It also will gut the incentive for these companies to come out with new and innovative products and services."

"By approving this deal, federal regulators are saying goodbye to the price reductions and better service options consumers have grown to expect from cell phone companies," said Gene Kimmelman of Consumers Union, adding that, with two major local telephone companies behind Cingular, "it just doesn't make sense to expect the local phone company to compete against itself with its wireless product."

But Sam Simon of the Telecommunications Research and Action Center said AT&T Wireless was not competitive.

"AT&T had given up the ghost," Simon told CBS Radio News. "AT&T customers were fleeing in droves and that was largely because their technology was not that good, they had not invested in it, they'd cut back on their customer service ... They were really a miserable company."

The Justice Department was joined in the court settlement by the states of Texas and Connecticut. A judge still must sign off on the agreement.

Last week, Cingular reported that operating profits slipped 5.5 percent despite gains in both subscribers and revenue. AT&T Wireless posted a 25 percent drop in third-quarter net income.

BellSouth transferred several of its assets in Latin America this month, to Spanish telecommunications company Telefonica SA, to raise cash needed for the deal.

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