In a critical blow to AT&T's proposed $39 billion merger with T-Mobile USA, federal regulators issued a staff report today that concluded the deal would lead to huge job losses and less competition.
In the 109-page report (PDF), the FCC said that a merger of the two wireless carriers "would substantially lessen competition and its accompanying innovation, investment, and consumer price and service benefits."
The report, which the FCC released this evening despite AT&T and T-Mobile's objections, also accused the carriers of making misleading statements about the benefits of the merger.
"The staff finds the applicants' assertions that the transaction would create jobs in the United States to be inconsistent with AT&T's internal analyses and record statements concerning cost reductions from the merger," the report said. "The staff also finds that there are serious questions whether the merger of AT&T and T-Mobile would cause other public harms that are not offset by the claimed benefits."
AT&T chief counsel Jim Cicconi criticized the commission for releasing the report, calling the decision "troubling."
"It is simply a staff draft that raises questions of fact that were to be addressed in an administrative hearing, a hearing which will not now take place," Cicconi said in a statement. "It has no force or effect under law, which raises questions as to why the FCC would choose to release it."
Cicconi also complained that the commission did not give AT&T time to review the report before releasing it to the public.
"The draft report has also not been made available to AT&T prior to today, so we have had no opportunity to address or rebut its claims, which makes its release all the more improper," he said.
The FCC, which said it released the report in the interest of transparency, had earlier in the day approved AT&T's request to withdraw its merger application before the commission. AT&T announced on Thursday its intention to withdraw the application and take a $4 billion charge to cover the possibility that the deal falls apart.
The withdrawal request came on the heels of FCC Chairman Julius Genachowski saying that he didn't believe the merger was in the public interest and had asked the other four commissioners to approve an administrative hearing, in which AT&T would have to prove otherwise.
In a briefing with reporters, FCC officials said that their evaluation of the deal found that the merger between AT&T and T-Mobile would create an "unprecedented" level of concentration in the wireless market. Officials went on to say that it was impossible to see how the deal could serve the public interest.
The FCC's opposition comes on top of an existing Department of Justice lawsuit filed to block the merger. The trial is scheduled to begin in February.