AT Inc.’s $39 billion bid for T-Mobile/USA Inc. faces a new roadblock as Federal Communications Commission Chairman Julius Genachowski asked commissioners to send the proposal to an agency judge for a hearing.
The hearing, which could lead to a rejection of the deal, was proposed in an order that Genachowski offered Tuesday for consideration by the full FCC.
Agency staff had found the proposed merger would significantly diminish wireless competition, an FCC official said.
The hearing would take place after the resolution of a Justice Department court challenge to the transaction, FCC officials said. The antitrust case is scheduled for trial in February.
AT is “reviewing all options,” spokesman Larry Solomon said.
The purchase of T-Mobile would eliminate one of four national U.S. wireless carriers. AT has said the transaction would help it bring wireless high-speed Internet service to more people.
Vonya McCann, senior vice president of governmental affairs at Overland Park-based Sprint Nextel, said concerns about the proposed merger “more than justifies moving this matter to an administrative law judge for a hearing.”
The FCC can designate a transaction for a hearing, which is akin to a trial, when it cannot find the deal is in the public interest. The administrative law judge presiding over the hearing delivers an initial decision that goes to agency commissioners for a vote. Commissioners may vote in coming days on Genachowski’s proposal.
“A hearing could go on for six to 12 months,” Andrew Lipman, a Washington-based partner with the law firm of Bingham McCutchen LLP, said in an interview. “It’s certainly a significant obstacle and roadblock.”
The last time the FCC designated a media merger for a hearing was in 2002, when the agency challenged Echostar Communications Corp.’s bid for fellow satellite company DirecTV, Lipman said. The companies dropped their bid, he said.
AT could continue to fight the Justice Department in federal court, and if it wins there it could seek a settlement to stave off an appeal of the verdict and to satisfy the FCC, Christopher King and David Kaut, analysts with Stifel Nicolaus Co., said in a note to investors Tuesday.
The federal district court judge’s decision “would likely be pivotal,” Kaut and King wrote.
Bloomberg News contributed to this report.