FCC Approval of AT&T’s Purchase of Centennial Likely in Days
The FCC could adopt an order this week approving AT&T’s $944 million purchase of Centennial, an eighth-floor official said Tuesday. Chairman Julius Genachowski circulated a draft order last week that includes conditions consistent with commitments made by AT&T last month, and commissioners aren’t expected to get hung up in a long negotiation, the official said. The chairman appears intent on finishing the order by the deal’s one-year anniversary on Saturday, the source said.
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Most of the FCC’s concerns about the deal concerned competition in several cellular markets in Louisiana and Mississippi, the official said. But the Justice Department dealt with the concerns last month when it required AT&T to sell assets in eight markets for approval of the deal, the official said. Centennial shareholders approved the sale in February. The FCC’s blessing is the last approval that the companies need. FCC spokeswoman Jen Howard declined to comment.
The deal probably “will get through without anything particularly onerous getting added,” said analyst Paul Gallant of Concept Capital’s Washington Research Group. But it’s always possible for commissioners to change conditions recommended by the staff, he said. The merger isn’t an industry-changing deal, so the FCC probably will wait until later to take up controversial issues like handset exclusivity, he said.
AT&T offered the FCC commitments in a letter Oct. 22. The carrier agreed to honor Centennial’s roaming agreements until they run out, or for 48 months after the closing date, whichever is later. AT&T said it would operate Centennial’s CDMA network in Puerto Rico and the U.S. Virgin Islands for 18 months after the closing and would limit dealings with Latin American carrier America Movil. AT&T said it would enter only into “arm’s-length commercial arrangements” with the company, “such as reseller and roaming agreements.”
AT&T’s commitment on roaming dealt with some of the Rural Cellular Association’s concerns, but it doesn’t “go far enough,” said Todd Lantor, an attorney for the group. The association wanted AT&T to have to meet the tougher requirements imposed on Verizon Wireless when it acquired Alltel, including an obligation to extend any roaming agreement written for AT&T’s or Centennial’s network across the combined network, he said. The association also wanted conditions limiting AT&T handset exclusives to six months and requiring interoperability agreements by the carrier with others that have compatible networks.
A Sprint Nextel spokeswoman said AT&T’s commitments soothed her company’s concerns that the CDMA network in Puerto Rico and the Virgin Islands would be shut down before Sprint could find a new roaming partner there. An attorney for Cincinnati Bell, which at first opposed the deal, didn’t return a request for comment.
AT&T urged fast approval of the deal at a meeting Friday with an aide to Commissioner Michael Copps and one Monday with Commissioner Meredith Baker, according to an ex parte filing by the carrier. AT&T said the companies’ commitments, with the DOJ-ordered divestitures, will ensure that the deal serves the public interest.
AT&T is expected to face integration problems because Centennial’s CDMA wireless operation in Puerto Rico isn’t compatible with AT&T’s GSM architecture. That raises the cost of moving cellular users to a uniform network, Zacks Investment Research warned in a recent note. The firm said AT&T has increasingly used acquisitions to expand its subscriber base and coverage area.