It appears increasingly likely that the US Federal Communications Commission will recommend the approval of Cingular Wireless LLC’s mammoth $41 billion acquisition of AT&T Wireless Service Inc. However, it also is likely to insist on some limited disposals.
Earlier this year, a dramatic bidding war broke out between mobile goliath Vodafone Group Plc and Cingular Wireless for the number-three US wireless operator AT&T Wireless. Both Vodafone and Cingular hoped the acquisition would give them a dominant position in the strategic US market, allowing them to overtake market leader Verizon Wireless, in which Vodafone holds a minority 45% stake.
Vodafone was outflanked by Cingular after it offered a cash bid of $40.7 billion, plus $6 billion of debt. Vodafone’s executives had gone to bed in London thinking that their $40 billion bid had won the day, only to wake up the next morning to discover that the rival bidder had made a last-minute offer.
The rubber-stamping of the acquisition had been expected by most analysts, but most interest has focused on the likely divestitures. FCC chairman Michael Powell is believed to favor limited divestitures, particularly in some rural areas where the expanded Cingular group is likely to face competition from only one or two rivals.
Cingular’s parents SBC Communications Inc and BellSouth Corp have already had to offload assets in order to help finance the massive deal. Both Cingular and AT&T Wireless have also offered to divest some airwaves in Georgia, Oklahoma, and Texas.
The proposed acquisition will also need to be approved by Justice Department antitrust regulators.