WASHINGTON – The Federal Communications Commission (search) gave its approval Tuesday to Cingular Wireless LLC's $41 billion acquisition of AT&T Wireless Services Inc. (AWE), completing the federal regulatory blessing necessary for creation of the country's largest cell phone company.
The move follows Monday's announcement that Justice Department (search) antitrust regulators approved the deal. Both agencies attached conditions to ensure there is adequate competition in different markets.
"We believe our conditions, combined with the benefits to the consumer experience brought by Cingular's new scale and scope, will ensure the public interest is served by this transaction," said FCC Chairman Michael Powell.
The two Democrats on the five-member commission dissented in part to the merger, saying they're concerned the loss of AT&T Wireless could have a negative impact on the wireline market.
"In many major in-region markets, Cingular now will have almost half of the mobile wireless market share. And in allowing the acquisition of AT&T Wireless, we permanently remove an independent source of competition to Cingular, SBC and BellSouth," Commissioner Jonathan Adelstein said.
The merger would give Atlanta-based Cingular about 47.6 million subscribers. That would top Verizon Wireless, the current market leader with 40.4 million customers as of midyear, while paring the number of national cell phone providers to five.
Under the FCC plan, the companies will not be allowed to merge in 16 markets and must divest themselves of assets in six additional markets. The 22 markets are in 15 states: Oklahoma, Texas, Kentucky, Arkansas, Connecticut, Mississippi, Missouri, Michigan, Louisiana, Massachusetts, Tennessee, Georgia, California, Nevada and North Carolina.
That is five markets more than the Justice Department required. The companies must meet conditions set by both agencies for the deal to go through. A judge also still must sign off on the deal.
Combined, Cingular and AT&T Wireless have about 70,000 employees, although layoffs are expected following the merger.
Stan Sigman, Cingular president and chief executive officer, said the new company would provide wireless services in 49 states and the 100 top metropolitan areas. AT&T Wireless officials deferred comment to Cingular.
"We hope the merger process will continue to progress in an orderly and expeditious fashion," Sigman said. "This merger will create a premiere provider that is very well-equipped to meet the most demanding needs of wireless customers today and in the future."
Two opponents of the deal — Consumers Union (search) and the Consumer Federation of America (search) — expressed concerns that the merger will harm consumers. They said the new company will have no incentive to compete against BellSouth and SBC in parts of the country where they overlap.
"This merger will have a devastating impact on consumers, who may have to pay more and may not receive the same level of service they currently enjoy," said Mark Cooper, director of research at Consumer Federation of America. "It also will gut the incentive for these companies to come out with new and innovative products and services."
Last week, Cingular reported that operating profits slipped 5.5 percent despite gains in both subscribers and revenue. AT&T Wireless posted a 25 percent drop in third-quarter net income.
BellSouth transferred several of its assets in Latin America this month, to Spanish telecommunications company Telefonica SA, to raise cash needed for the deal.
In Tuesday's trading on the New York Stock Exchange, shares of San Antonio-based SBC slipped 27 cents to $24.72, while Atlanta-based BellSouth fell 41 cents to $26.01.