Life after a Failed Merger

by Matt Klassen on December 23, 2011

When it was first conceived, the merger between AT&T and T-Mobile seemed like a match made in heaven for both companies; AT&T would get the bandwidth it needed to continue to build an unreliable and mismanaged network, T-Mobile days of languishing as the country’s fourth largest carrier would be over, and T-Mobile’s parent company Deutsche Telekom would finally be able to extricate itself from the chaotic American mobile market.

But in some relationships there often comes a time when the best course of action is to cut and run, and with AT&T deciding not to challenge Federal regulators or run the gamut of lawsuits waiting in the wings it means that everyone will have to pick up the pieces then head back to the drawing board and find some more regulator-friendly ways of solving the myriad of lingering issues the original deal was meant to fix.

The reality is that while the proposed merger deal may be dead, the problems the acquisition was supposed to solve are still very much alive. So where do AT&T, T-Mobile, and Deutsche Telekom go from here?

Of the three companies involved in this merger, I would wager that AT&T will have the most difficult time finding other ways of solving its woes. Over the course of the year, as AT&T was forced to defend its rationale behind the proposed deal, it came to light that the country’s second largest wireless carrier was facing a spectrum crisis, lacking the bandwidth necessary to create the powerful and stable network AT&T customers have always dreamed of.

Aside from the fact that AT&T already owns more available bandwidth than any other wireless company on the market and has traditionally mismanaged it, is there any possibility for AT&T to solve to spectrum woes?

There are a few areas where AT&T could find the spectrum it needs, including the possibility of spectrum partnerships with other smaller companies, agreements that would give AT&T control of the bandwidth it needs to properly roll out its next generation LTE network. The lingering fallout from the failed T-Mobile acquisition, however, will likely be that any future deal AT&T tries to pull off will be subject to just as much, if not even more, scrutiny than ever before.

It’s been no secret in all of this that T-Mobile’s parent company, German telecommunications giant Deutsche Telekom (DT), wants out of the American wireless market. Its T-Mobile subsidiary has perpetually languished in the limbo between serious wireless competitor and lowly prepaid service provider, with competitors on both sides continuously eating away at T-Mobile’s subscriber base.

In this post-AT&T era, however, there are likely several options still available to DT in regards to selling off its T-Mobile brand, deals that are admittedly smaller than the proposed AT&T merger but nonetheless more regulator-friendly. If it hasn’t started talks already, look for DT to explore its options with other smaller competitors like Sprint or Dish Network in the New Year, deals that regulators would likely see as improving competition rather than creating market monopolies.

In fact, there would be a certain satisfying irony involved if Sprint in particular, the company that led the private sector revolt against the AT&T/T-Mobile merger, were able to acquire T-Mobile, as it would simultaneously demonstrate the benefits of lobbying against your closest competitors and give us all a good laugh…all of us except AT&T of course.

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

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