Thursday, September 1, 2011

U.S. Government Sues to Block AT&T, T-Mobile Merger

The Justice Department on Wednesday sued to block the proposed $39 billion merger between the cellphone giants AT&T and T-Mobile USA, arguing that keeping them separate would preserve competition in the wireless industry and even help save jobs of American workers.In a lawsuit filed in Federal District Court here, the Justice Department argued that the proposed deal, which would join the nation’s second- and fourth-largest wireless phone carriers, would result in higher prices and give consumers fewer innovative products. The companies disputed those assertions, and labor unions that support the deal said that the merger would add jobs, not cost them.

“The view that this administration has is that through innovation and through competition, we create jobs,” said James M. Cole, the deputy attorney general, at a news conference announcing the lawsuit. Mergers usually reduce jobs through the elimination of redundancies, he said, “so we see this as a move that will help protect jobs in the economy, not a move that is going in any way to reduce them.”

The lawsuit, which could take years to wind its way through the courts, sets up a prominent antitrust battle — a rarity since the election of President Obama, who campaigned with promises to revitalize the Justice Department’s policing of mergers and their effects on competition, which he said had declined significantly under the Bush administration.

AT&T said it would fight the lawsuit. “We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed,” Wayne Watts, an executive vice president and general counsel at AT&T, said in a statement. “The D.O.J. has the burden of proving alleged anticompetitive effects, and we intend to vigorously contest this matter in court.”

Deutsche Telekom, the German parent of T-Mobile USA, said that the Justice Department “failed to acknowledge the robust competition in the U.S. wireless telecommunications industry and the tremendous efficiencies associated with the proposed transaction, which would lead to significant customer, shareholder and public benefits.”

AT&T has been actively involved in discussions with both the Justice Department and the Federal Communications Commission since the proposal was announced in March. The company has indicated that it would consider divestitures or other business actions to allow the deal to go forward.

But Justice Department officials said that those discussions led it to believe that it would be difficult to arrange conditions under which the merger could proceed. “Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer,” said Sharis A. Pozen, acting assistant attorney general in charge of the antitrust division. Offering AT&T only a glimmer of hope, she added that the department’s “door is open” to discuss possible remedies.

Both the F.C.C. and the Justice Department would need to approve the merger, and though they consider a proposed combination on different scales, they usually reach the same conclusion. The F.C.C., which has never approved a significant merger that the Justice Department is challenging in court, hinted that it was leaning in the same direction of blocking the AT&T deal with T-Mobile.

“Competition is an essential component of the F.C.C.’s statutory public interest analysis,” said Julius Genachowski, the F.C.C. chairman. “Although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition.”

Consumer advocacy groups cheered the administration’s move. “This announcement is something for consumers to celebrate,” said Parul P. Desai, the policy counsel for Consumers Union. “We have consistently warned that eliminating T-Mobile as a low-cost option will raise prices, lower choices and turn the cellular market into a duopoly controlled by AT&T and Verizon.”

Harold Feld, legal director of Public Knowledge, a nonprofit group, said that “fighting this job-killing merger is the best Labor Day present anyone can give the American people.” Labor groups, however, have generally supported the merger, in part because a substantial number of AT&T employees are members of the Communication Workers of America, while T-Mobile is a largely nonunion company.

Mr. Cole said the department thought that an independent T-Mobile would be more likely to expand its business and add jobs, while mergers often eliminate jobs.
Critics have faulted the Obama administration for not doing more to block big corporate mergers. Those involving Comcast and NBC Universal, Ticketmaster and Live Nation, and United and Continental Airlines were all approved with conditions attached.But the challenge to the merger makes the future of an independent T-Mobile more of a question than before the deal was announced. Deutsche Telekom has said it does not want to continue to invest in the American wireless market, preferring to focus on the growth of its telecommunications business in Europe.

Before AT&T announced plans to buy T-Mobile, there was consistent speculation that a merger between T-Mobile and Sprint Nextel, the third-largest provider, was in the works. But such a deal seems unlikely in light of the arguments mustered by the Justice Department against the AT&T deal.

Those arguments include the assertion that a combination that took the number of nationwide wireless phone providers down to three from four would harm competition, because the four nationwide service providers already account for more than 90 percent of the mobile wireless connections nationwide.

The proposed merger has been a topic of robust debate in Congress, where both houses have held committee hearings on the merger. At one of them in May, Randall L. Stephenson, the chief executive of AT&T, tried to convince lawmakers that AT&T and T-Mobile should not even be considered as competitors.

He later abandoned that assertion, going back to the company’s main point: While the two companies are competitors, plenty of other competition exists in local wireless markets, with most potential customers having a choice among at least five providers.

“Certain critics may attempt to create a myth that only a few national competitors exist, but wireless competition occurs primarily on the local level,” Mr. Stephenson said.

The Justice Department turned some of AT&T’s own statements against it, however. “As AT&T acknowledged less than three years ago during a merger proceeding,” referring to AT&T’s acquisition of Centennial Wireless, “it aims to ‘develop its rate plans, features and prices in response to competitive conditions and offerings at the national levels — primarily the plans offered by the other national carriers,’ ” the Justice Department said in its lawsuit. “As AT&T recognized, ‘the predominant forces driving competition among wireless carriers operate at the national level.’ That remains the case today.”

Kazakh president wants tougher laws to counter extremism

The spread of religious extremism threatens stability in mainly Muslim Kazakhstan, President Nursultan Nazarbayev said on Thursday, urging parliament to adopt tougher laws on migration and religious activity.

Oil-producing Kazakhstan, Central Asia’s largest and most successful economy, has only recently witnessed outbursts of militant Islam experienced by other former Soviet states in the vast region bordering Afghanistan.

In a rare official admission, Kazakh prosecutors in the western Atyrau region said on Wednesday a group of extremists planning “acts of terror” had been detained.

“The parliament has to consider adopting a law on religious activity,” Nazarbayev told a session of parliament, which is composed solely of deputies of his ruling Nur Otan Party.

“The talk is not about banning the freedom of conscience. No. It is about protecting the state from religious extremism.”

Muslims make up 70 percent of Kazakhstan’s 16.5-million population, and Nazarbayev said Kazakhstan had to tighten control over its borders. He did not mention any specific countries which may pose a threat.

“Whoever wants may come here, whoever wants may open a mosque and name it after his father. No one knows what these mosques are really doing, no one has approved (their opening),” he said. “But, as a state, we should put our home in order.”

Radical Islam, fuelled by widespread poverty, is on the rise in the fertile but overpopulated Ferghana Valley where former Soviet Uzbekistan, Tajikistan and Uzbekistan share borders.

Official repression further inflames popular discontent in Tajikistan and Uzbekistan, while ethnic riots in Kyrgyzstan in June 2010 temporarily displaced hundreds of thousands of people.

Nazarbayev, whose steppe nation is a major exporter of grain and flour, said he shared concerns by the United Nations that food shortages in the surrounding region could increase the risk of illegal migration, epidemics and “other conflicts”.

A 71-year-old former steelworker who in Soviet days rose to prominence through the Communist Party, Nazarbayev has ruled Kazakhstan for more than two decades and says preserving stability in his multi-ethnic nation is his main achievement.

He has put in place rapid market reforms and attracted billions of dollars in foreign investment, mainly in the energy and metals sectors.

But at the same time human rights groups and the West have criticized Kazakhstan’s record on democracy, pointing to rigid state control of the media and little tolerance of dissent.

Clinton heads to Paris to sound out Libya rebels on transition needs


US Secretary of State Hillary Clinton left Wednesday for international talks in Paris aimed at sounding out Libyan rebels on what US officials call their “enormous” needs in establishing a new government.

What is at stake, US officials say, is how well the rebels bring security to the capital Tripoli and other war-torn areas, restore services such as water, deal with fallen but fugitive strongman Muammar Qaddafi, and prepare for democratic rule.

The “credibility” of the National Transitional Council (NTC), the political umbrella for the rebels, rests on such achievements, a senior US official told reporters on the condition of anonymity.

The NTC is recognized by the US and dozens of other countries as Libya’s interim governing authority.

 Clinton’s participation in what has been dubbed the “Friends of Libya” conference comes as the rebels, following a six-month armed revolt, try to wipe out the last pockets of resistance from Qaddafi loyalists.

US officials say the conference, broader than the preceding “Libya Contact Group” meetings, will hear a report from the NTC on its needs in the areas of governance, security, humanitarian aid, and economic reconstruction.

Urgent needs in Tripoli – where Qaddafi forces were overrun in fierce battles more than a week ago – are water, food, gasoline and electricity, officials say.

“The needs are enormous. Qaddafi has left them ... with a shattered country,” the US official said.

Having called for $5 billion, the NTC will likely press for more funds after $3.1 billion in Libyan assets frozen in the US and Britain were released in the last two weeks by decisions at the United Nations.

The funds will pay for UN programs, energy bills, health, education and food, as well as to pay the salaries of public sector workers over the Eid holiday to mark the end of the Ramadan fasting month.

US officials said the international community expects to focus more on releasing frozen assets and helping revive Libya’s oil industry rather than drum up support from donor countries.

“I don’t expect there’s going to be a huge donor type issue,” the senior US official said. However, he said it might be necessary to arrange bridge loans via the World Bank or the International Monetary Fund in order to rebuild the country’s infrastructure.

The official said there were still threats to peace and stability in Libya as Qaddafi loyalists have holed up in both Sirte, Qaddafi’s hometown, and Sabha, the desert stronghold of the Libyan leader’s clan.

Qaddafi’s son Seif al-Islam on Wednesday warned in an audio message on a Syria-based television channel against a rebel attack on Sirte.

 Meanwhile, the whereabouts of Qaddafi, Seif al-Islam and another son remain unknown.

“You have Qaddafi and two of his most dangerous sons, Mutassim and Seif, still at large. That in any distance would pose a danger,” the US official said.

Seif al-Islam said on Wednesday that he was still in Tripoli and that the fight against rebels who captured the capital last week would go on. In London, ITV News reported that British special forces soldiers are in Libya hunting for Qaddafi, who they believe is still in the country after neighboring Algeria denied him entry.

US officials will also sound out the rebels on their plans for a political transformation they hope will be inclusive and democratic.
NTC chairman Mustafa Abdel Jalil promised on August 16 to hand over power to an elected assembly within eight months of the collapse of Qaddafi’s regime, as he sketched out the country’s path to democracy.