The American Civil Liberties Union, a group of small telecommunications companies and Sprint Nextel Corp. have joined to opposed AT&T Inc.'s bid to acquire BellSouth Corp.
In filings with the Federal Communications Commission, the ACLU said it wants the commission to hold up approval of the merger until the phone companies settle allegations that they had released customer information to the National Security Agency.
Sprint and the telecom group, meanwhile, are looking to squash the deal completely, with the group citing "irreparable harms to competition" from a combination.
Experts, however, still believe the deal will go through.
AT&T dismissed the claims. "There is little overlap between the two companies and competition is well established in the markets where both companies now operate," said spokesman Michael Coe. "There are always those who'll try to use these proceedings to advance their own, narrow special interests."
San Antonio-based AT&T, which is the No. 1 phone service provider in the United States, will further cement its top position after acquiring Atlanta-based BellSouth, which is the No. 3 player and dominates the Southeast region, in the $67 billion deal. AT&T will also take full control of Cingular Wireless, the largest wireless carrier by customer base.
Sprint argued that the combination would mean that it would be more dependent on AT&T for connecting to its cell-phone towers. "Sprint Nextel has no alternative to BellSouth or AT&T for more than 99 percent of Sprint Nextel's PCS cell sites in the BellSouth and AT&T service areas," the company said in its filing.
In a separate filing, the telecom group, led by XO Holdings Inc., said the merger only creates a larger monopoly with a greater ability to thwart competition between rival providers, as well between AT&T and BellSouth.
AT&T is "quickly reassembling the old Bell System," XO Communications spokeswoman Heather Gold said.
Other members in the group include Talk America Holdings Inc., Cbeyond Communications Inc. and privately held companies NuVox Communications Inc., Grande Communications Inc., Supra Telecom and Xspedius Communications.
Noise from smaller companies are typical during the merger process. "Normally, you have these kinds of complaints in these transactions," said Tom Burnett, director of research at Wall Street Access. "The applicants are looking to extract a favorable negotiating strategy.
"You don't get through these things without a lot of complaints."
The complaint from Sprint was more unusual, especially since it had just recently completed its own $35 billion merger with Nextel Communications Inc., he added. Still, Burnett said he expects the merger to close by the end of the year.
The ACLU, meanwhile, is seeking to end the alleged NSA spying program, first reported on last month by USA Today. The story claims that the Bells _ AT&T, BellSouth and Verizon Communications Inc. _ have been releasing customer information to the government. The companies have denied doing anything illegal.
"The fact is, AT&T does not give customer information to law enforcement authorities or government agencies without legal authorization," Coe said. "We have an obligation to assist law enforcement and other government agencies responsible for protecting the public welfare, whether it be an individual or the security interests of the entire nation."
BellSouth has denied participating in the NSA program. "The ACLU letter is moot to us, because we haven't had any involvement," said spokesman Jeff Battcher.
The ACLU claims that under existing law, the FCC cannot permit the pending merger between the two companies to proceed without first investigating the merits of the allegations.
The FCC "has a statutory duty as part of its review of the AT&T-BellSouth merger application to perform a full investigation of the claims reported in USA Today," the ACLU said in a statement Tuesday.
It's unlikely that the FCC will base its decision on the ACLU complaint due to the national security issues involved, Burnett said.