RealTime IT News

DOJ Spells Out SBC, BellSouth Venture Conditions

If SBC Communications Inc. and BellSouth Corp. really want to join forces to become the nation's second largest wireless carrier, they need to shed businesses in 16 metropolitan markets, a Department of Justice release announced Wednesday.

According to the DOJ, the merger would have stifled wireless telephony services in 16 metropolitan markets including Los Angeles, Indianapolis and New Orleans.

Joel Klein, assistant attorney general of the department's antitrust division, said the government's decree ensured fair competition.

"Today's action by the Department ensures that this joint venture will not reduce competition in these local markets," Klein said. "Without the divestitures required by this decree, wireless customers in 16 markets, large and small, would have had fewer choices and faced the risk of higher prices and lower quality service."

Anticipating the decree, SBC unloaded wireless businesses in Indianapolis, New Orleans and Baton Rouge, LA, in July.

According to Selim Bingol, SBC spokesperson, the two companies having been working closely with the government all summer to meet the merger requirements. Compliance ensures DOJ approval and would then go before the Federal Communications Commission for final approval. Earlier this year, the European Union gave its blessing, and officials from the new venture expect to begin operations later this year.

"We're very pleased to get this approval from the Department of Justice," Bingol said. "As you know, we've divested businesses in Indianapolis and New Orleans in anticipation of this decree, and BellSouth, I believe is working on Los Angeles to meet the merger requirements. We're well on the way to creating a national wireless carrier this fall."

Under terms of the decree, any market where BellSouth and SBC wireless coverage overlaps is considered a violation of fair competition, which could lead to higher prices, lower quality and quantity of service, and fewer network improvements.

The DOJ identified 16 Metropolitan Statistical Areas in the U.S. that would violate fair competition standards. Under the purview of the FCC, the 306 MSAs nationwide are used to define an area for cellular licensing.

The joint venture, which has yet to be named, will create the nation's second largest wireless carrier with around 16 million customers. That number is sure to change slightly as the two companies drop customers in one area and pick up others.

Verizon Wireless, the culmination of Verizon Communications and Britain's Vodafone Group, hold the top spot in the wireless carrier industry, with more than 18 million subscribers. The wireless company is currently in the silent phase of its initial public offering.

Rounding out the top three is AT&T Wireless with 13 million customers.