It's over: AT&T kills T-Mobile bid at last

MOST READ
LATEST NEWS

EVENTS

Join Orange, Amazon and Google at the Open Mobile Summit London May 29-30

MARKET PLACE

Carrier Broadband Performance: Africa & Middle East

Voice over LTE: Market Analysis and Forecasts

Advertize your telecoms job

JOBS

Experienced Event Organiser

It's over: AT&T kills T-Mobile bid at last

Options for both cellcos look limited now, with Verizon sitting on the key cableco spectrum deals

By CAROLINE GABRIEL

Published: 20 December, 2011

READ MORE: M&A | US | AT&T | Infrastructure | LTE

AT&T finally put its ill-starred bid to acquire T-Mobile USA out of its misery, calling off the $39bn acquisition. What it had hoped would be a bold move to put itself in pole position in LTE turned into a massive strategic blunder, leaving it with a $4bn break-up fee to pay TMo parent Deutsche Telekom and a scrabble for additional spectrum, at a time when Verizon has snapped up many of the best options with its string of cableco deals (though these are also subject to approval).

AT&T had looked to add spectrum capacity for its LTE push, but succeeded only in spending nine months in increasingly desperate negotiations to save its controversial deal, helping condemn the US to a year of stagnation in mobile progress (exacerbated by the LightSquared issue and Sprint's vacillations over LTE and Clearwire). Meanwhile, Verizon was the only major in dynamic action - having echoed AT&T's statements that it would run out of capacity around 2014 or 2015, it proceeded to spend a fraction of its rival's proposed $39bn fee for TMo on its own spectrum deals and raced ahead in LTE build-out.

AT&T CEO Randall Stephenson insisted that the merger plan had made strategic sense, but was killed by the sheer weight of regulatory opposition, with the Department of Justice suing to block the deal and the FCC also weighing in against it. Some support had been seen, notably from Silicon Valley, while Verizon had stayed neutral, but there was fierce opposition from smaller cellcos led by Sprint, and in the end, fears of the loss of the fourth national cellco outweighed AT&T's arguments that the TMo buy would accelerate its LTE roll-out, and therefore the extension of universal broadband services, thereby creating jobs and wealth.

Its pleas that TMo, as a standalone organization, was not viable anyway, had some resonance, but AT&T was not helped by the fact that other firms which might have reassured the DoJ by stepping into the national carrier gap - LightSquared, Clearwire, a Leap/MetroPCS combination - had problems of their own.

So AT&T will now be left pondering its back-up plan. In a painful coda to the sorry saga, it will pay a $4bn fee to Deutsche Telekom, which despite that consolation prize will also be bitterly disappointed, as it had hoped to use the proceeds from a US exit to expand in central and eastern Europe and pay off debt - both urgent priorities as its traditional markets saturate and fall prey to the eurozone crisis. Now it will end up with a roaming deal with AT&T and a hunt for a new acquirer (unlikely in the current climate) or spectrum/wholesale deals to make TMo viable in the 4G era.

In its statement, AT&T said: "The actions by the Federal Communications Commission and the Department of Justice to block this transaction do not change the realities of the US wireless industry. It is one of the most fiercely competitive industries in the world, with a mounting need for more spectrum that has not diminished and must be addressed immediately. The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage. In the absence of such steps, customers will be harmed and needed investment will be stifled. AT&T will continue to be aggressive in leading the mobile internet revolution."

Pages: 1 | 2