Department Criticized For Approving Big AT&T Deal
By Amy Schatz and Siobhan Hughes
The Wall Street Journal
Thursday, October 12, 2006
WASHINGTON -- The Justice Department's unconditional approval of
AT&T Inc.'s $67 billion buyout of BellSouth Corp. drew criticism
from consumer advocates and lawmakers, raising the possibility
that the deal could face delays at the Federal Communications
Hours before the Justice Department's decision was announced
yesterday, FCC Chairman Kevin Martin changed course and proposed
limited divestitures to protect big-business users of high-speed
data lines in 32 office buildings, lawyers who have seen the
proposal said. The FCC was scheduled to approve the deal as
early as today, but cancelled the vote last night, rescheduling
it for tomorrow.
The Justice Department approved AT&T's purchase of BellSouth
without any conditions after determining that the combination
isn't likely to hurt competition in the telecommunications
industries. "After thoroughly investigating AT&T's proposed
acquisition of BellSouth, the Antitrust Division determined that
the proposed transaction is not likely to reduce competition
substantially," Justice Department antitrust chief Thomas
Barnett said. "The division investigated all areas in which the
two companies currently compete."
The clearance triggered an outcry from smaller phone-company
rivals, Democrats on Capitol Hill and the FCC as well as
consumer groups. Opponents of the acquisition complained that
the nation's top antitrust regulator had abdicated its
responsibility to scrutinize whether the new company, which
would control local phone lines from California to Florida,
would be so big that it would lessen competition. AT&T also
would have sole control of Cingular Wireless, the nation's
largest cellular carrier by number of subscribers.
"The Justice Department has packed its bags and walked out on
consumers and small businesses by refusing to impose even a
single condition in the largest telecom merger the nation has
ever seen," Democratic FCC Commissioner Michael Copps
complained. The FCC's other Democrat, Jonathan Adelstein,
agreed: "By failing to issue a complaint, consent decree, or
condition, it appears [the Department of Justice] took a dive on
one of the largest mergers in history just to avoid further
Although Mr. Martin, a Republican, has been pushing hard to wrap
up the agency's review, it isn't clear that he has the three
votes necessary to approve the acquisition. Republican FCC
Commissioner Robert McDowell has so far indicated that he might
be recused from voting because he formerly worked for a group
that opposes the transaction. In addition to Mr. Copps, Mr.
Adelstein has expressed concern about approving the acquisition
without conditions. That would leave Mr. Martin without a
majority on the five-person commission.
AT&T, San Antonio, said it was elated with the quick Justice
Department approval of the merger. "This unequivocal and
unconditional approval underscores the competitive nature of our
industry and the pro-competitive benefits of this merger,"
General Counsel James Ellis said.
The BellSouth takeover was valued at $67 billion when it was
announced in March. Since then, BellSouth's stock price has
risen and based on yesterday's 4 p.m. price, the deal is valued
at $78.8 billion, BellSouth said. AT&T shares rose 19 cents to
$32.96 in New York Stock Exchange 4 p.m. composite trading,
while BellSouth shares were up 24 cents to $43.44, also on the
--Mark H. Anderson
contributed to this article.
Write to Amy Schatz at
Amy.Schatz@wsj.com and Siobhan Hughes at