AT&T’s Desperation Divestiture Deal

by Matt Klassen on November 28, 2011

Just over two months ago a rumour floated through the blogosphere that AT&T was considering divesting resources to smaller competitors in an effort to assuage antitrust concerns over its proposed merger with T-Mobile. Despite mounting opposition, the divestiture plan was seen by many as an AT&T ploy to quiet vocal opponents like Sprint by offering them both spectrum and subscribers before their opposition ruined the entire deal…the plan didn’t work.

Now with the Sword of Damocles looming perilously over this merger its becoming increasingly clear that AT&T is feeling both fearful and desperate, so much in fact that it’s running the same failed play over again; a sort of Hail Mary divestiture plan.

According to a Bloomberg report, AT&T is preparing to “divest a significantly larger portion of assets than it had initially expected,” with the report saying that as much as 40 percent of T-Mobile’s USA assets could be up for grabs. But will such a desperation play quell the voices of discontent, or is this proposed merger really doomed to fail?

In a post last week regarding the FCC’s recent opposition to this merger I posed the question, how long will AT&T keep fighting to keep its T-Mobile acquisition alive? The penultimate answer to that question is, of course, as long as it’s cheaper to keep moving forward than it is to go back.

Its been widely covered that AT&T has agreed to pay T-Mobile a substantial fee if this merger should fall through—to the tune of $4 billion plus spectrum and additional resources—and when one compares those stiff penalties to the value of 40 percent of T-Mobile’s USA holdings, I would guess that the latter is still the more affordable course of action.

That said, as Damocles learned in the famous Greek parable, looming fear can make even the acquisition of great power and wealth seem like something to be avoided, and in this case its becoming clear that AT&T has an abundance of fear; fear that because of its cocksure power grab its significant investment will be lost.

As I said several months ago when AT&T first quietly floated this notion of divesting spectrum and other assets as a way of circumventing monopolization concerns, I truly doubt anyone will buy it. Should this deal go through—and its looking ever-increasingly like it won’t—I would expect such a divestiture plan to come from the DOJ or the FCC, the regulatory bodies concerned with public interest instead of the greedy telecom giant looking out for its bottom line.

The problem, of course, is that the DOJ and the FCC are seemingly not even willing to entertain the notion of this merger, evidenced by the lawsuit filed by the former and the strong public comments in opposition to the deal from the latter.

In the end, the fact that desperation and fear are seeping through the cracks in AT&T’s once concrete veneer may be the sort of encouragement the opponents of this deal need to keep pressing forward; meaning that while the deal isn’t dead yet, each of these successive stories is simply one more nail in the coffin.

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Written by: Matt Klassen. Follow by: RSS, Twitter, Facebook, or YouTube.

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