AT&T Abandons T-Mobile Merger

by Matt Klassen on December 21, 2011

Anticipated but nonetheless surprising, AT&T has officially withdrawn its bid to purchase T-Mobile, thus ending one of the most arduous and drawn out telecom stories of the year. The end of the acquisition bid means that AT&T will agree to cough up $4 billion in cash and spectrum as per its pre-merger agreement with T-Mobile parent company Deutsche Telekom.

With the deal now laying in ashes you will be hard pressed to find someone, anyone, who is mourning AT&T’s loss. Instead, the virtual streets of the news media are filled with the raucous sounds of cheering as clearly Santa has come early for many consumer advocacy groups, telecom competitors, and bureaucratic entities like the Department of Justice and the Federal Communications Commission.

But what will this collapse mean for the telecom market, mobile consumers in general, subscribers of T-Mobile and AT&T in particular? Not only that, but what’s next for T-Mobile itself, a company that’s likely still sitting on the auction block?

As I stated initially, while the end to the ongoing merger saga is certainly a surprise, it’s obvious that the writing was on the wall for AT&T. I would guess that the country’s second largest wireless carrier considered itself able to handle the lawsuits from competitors, advocacy groups, and various concerned bureaucrats looking for something to do, but you just knew that things looked very bleak for AT&T when the DOJ sued to block the deal, one of the two groups AT&T would have needed to sign off on the merger.

The opposition continued to mount, however, as soon after the FCC publicly raised several concerns regarding the potential acquisition, ultimately forcing AT&T back to the drawing board to revise or abandon its plan. Truthfully, with several stayed lawsuits waiting in the wings for AT&T to emerge with whatever revisions it might have added no deal that would have seen T-Mobile merge with AT&T would have ever been allowed to go through.

The concerns with the merger focused primarily on the antitrust and anti-competition issues such a monumental acquisition would create. As Acting Assistant Attorney General for the Antitrust Division Sharis A. Pozen explains, “Had AT&T acquired T-Mobile, consumers in the wireless marketplace would have faced higher prices and reduced innovation. We sued to protect consumers who rely on competition in this important industry. With the parties’ abandonment, we achieved that result.”

Aside from consumers winning a clear victory in the battle against big business, this can also be seen as a significant victory from Sprint Nextel, the country’s third largest wireless provider who ostensibly led the corporate rally against this merger. Had the merger gone through I would have no doubt that within the next five years Sprint would have collapsed, unable to compete in the market duopoly such a deal would have created.

The question that remains after all this, though, is what’s next for T-Mobile? Its parent company, Deutsche Telecom—now flush with money from AT&T’s $4 billion payout—may still be looking to divest its T-Mobile wireless brand, meaning that merger options for other smaller companies like MetroPCS, Leap Wireless, or even Sprint may still be on the table. Who knows, maybe that’s been T-Mobile’s plan all along?

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

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October 16, 2012 at 9:08 am

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