AT&T – BellSouth Merger Runs into Opposition

The American Civil Liberties Union (“ACLU”), a group of small telecommunications companies, and Sprint Nextel Corp. (“Sprint”) have joined to oppose AT&T Inc.'s (“AT&T”) bid to acquire BellSouth Corp. (“BellSouth”). In its June 5th filings with the FCC, the ACLU said it wants the commission to hold up approval of the merger until the phone companies settle allegations that they had released customer information to the National Security Agency (“NSA”). Sprint and the telecom group, meanwhile, are looking to squash the deal completely, with the group citing “irreparable harms to competition” from a combination. AT&T dismissed the claims.
San Antonio-based AT&T, which is the No. 1 phone service provider in the United States, will further cement its top position after acquiring Atlanta-based BellSouth, which is the No. 3 player and dominates the Southeast region, in the $67 billion deal. AT&T will also take full control of Cingular Wireless, the largest wireless carrier by customer base. Sprint argued that the combination would mean that it would be more dependent on AT&T for connecting to its cell-phone towers. “Sprint Nextel has no alternative to BellSouth or AT&T for more than 99% of Sprint Nextel's PCS cell sites in the BellSouth and AT&T service areas,” the company said in its filing. In a separate filing, the telecom group, led by XO Holdings Inc., said the merger only creates a larger monopoly with a greater ability to thwart competition between rival providers, as well between AT&T and BellSouth. Other members in the group include Talk America Holdings Inc., Cbeyond Communications Inc. and privately held companies NuVox Communications Inc., Grande Communications Inc., Supra Telecom and Xspedius Communications. The ACLU, meanwhile, is seeking to end the alleged NSA spying program. AT&T, BellSouth and Verizon Communications Inc. have denied doing anything illegal in response to claims that they have been releasing customer information to the government. The ACLU claims that under existing law, the FCC cannot permit the pending merger between the two companies to proceed without first investigating the merits of the allegations.