Approval Appears Likely For AT&T-TCI Deal

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June 24, 1998 (1:52 PM EDT)

By Andrew Craig,

Telecommunications regulators are likely to give the $48 billion merger between AT&T and Tele-Communications (TCI) announced Wednesday an easier passage than other recent communications company mergers, according to analysts.

The U.S. government will review AT&T's proposed acquisition of cable television company TCI, a deal valued at $48 billion.

The pact may allow AT&T (company profile) to break open the local phone monopoly. AT&T's strategy for getting back into local phone service includes combining its long distance, wireless, and Internet services with TCI's cable, telecommunications, and high-speed Internet businesses into a single company, to be called AT&T Consumer Services.

Attorney General Janet Reno said Wednesday that it had not yet been decided whether the review would be done by the Justice Department's Antitrust Division, or the Federal Trade Commission, another government agency that also has responsibility for enforcing antitrust laws.

Meanwhile, Assistant Attorney General Joel Klein said if his antitrust division does review the merger, the deal will be considered on its merits.

"We evaluate all mergers on their own facts. I don't have any preconceptions," he said. "We'll look at the merger and determine whether it's good for consumers and good for America, or not good for consumers, and we'll take action accordingly."

A list of telecommunication mergers have ended up under the regulator's scrutiny within weeks of inking their deals, notably WorldCom-MCI, and GTE-Ameritech. But analysts say the AT&T-TCI deal could be different.

"It is different from the mergers which have been going on in the same industry," said Eileen Eastman, director of telecommunications at The Yankee Group in Boston.

"If AT&T and TCI can make it look like a very positive move -- to get into the residential market and open it up to competition -- then I think they will have an easy time getting it through," said Eastman.

The companies' lawyers are likely to have examined the deal very carefully, to assess whether the deal was unfair or removing competition, said Dan Merriman, vice president of Giga Information Group, based in Cambridge, Mass.

But, AT&T and TCI are two players that had been in different fields, said Merriman. This has not been the case for previous mergers that have been scrutinized by regulators, such as Ameritech-GTE where both companies are competing in the same space, he said.

Both companies will be working with government officials in Washington, D.C., to get the deal approved over the next nine months, said AT&T chairman and CEO, Michael Armstrong on Wednesday. But, he said he believes the deal is in accord with the Telecommunication Act of 1996.

If the deal goes through, the Baby Bells -- which are restricted from providing long distance telecom services -- are likely to see an approval as a sign from the regulators that the long distance market is open to local carriers, Armstrong said.

Only one similar merger has occurred recently, between U S West and Continental Cable in the early 1990s, said Eastman. At the time, a lot of hype surrounded the merger of a cable and telecom company, but U S West has now spun off the group, which it renamed Media One.

An important development that the deal shows, is a "re-energized AT&T," said Eastman. "Today AT&T has made a very powerful statement," she said. "It is back in the game, it has set the rules for how the game is played, and it is going to win the game."