AT&T Calls It Quits on T-Mobile Deal

Posted by · December 19, 2011 4:26 pm

Ten days ago, AT&T encountered what I predicted “may end up being the fatal blow” to its merger plans with T-Mobile USA. Facing heavy regulatory resistance from the FCC and the Justice Department from the start, the plan for the No. 2 wireless telecom to absorb the No. 4 was already a long shot. Ten days later, AT&T finally saw the writing on the wall and withdrew its merger bid.

Adding insult to injury, such a move is by no means cheap, costing AT&T an unreciprocated $4 billion. Though such a price tag hardly poses a threat to the company’s viability, AT&T nonetheless felt the pain of the blow.

This, however, does not mean that AT&T is admitting that acquiring T-Mobile USA would have been a bad thing. In fact, the telecom spoke quite to the contrary in a statement announcing the drop of its merger bid.

“The actions by the Federal Communications Commission and the Department of Justice to block this transaction do not change the realities of the U.S. wireless industry,” the statement began. “The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage.”

Warning of ramifications for the failure of the merger, the statement added, “In the absence of such steps, customers will be harmed and needed investment will be stifled.”

It did not end there, though.

AT&T Chairman and CEO Randall Stephenson made clear the company’s determination to “be aggressive in leading the mobile Internet revolution.”

And yet, Stephenson made clear his stance that leading such a movement “will require policymakers to do two things.” Among those two things was a call to allow “free markets” to be able to “work,” which he said could be done in part if the FCC approved yet another acquisition of Qualcomm spectrum. The AT&T CEO’s second request was that legislators pass laws which “meet our nation’s longer-term spectrum needs.”

On the other hand, apart from consumers in general, perhaps the largest sigh of relief over the merger’s failure comes from Sprint, No. 3 on the wireless totem pole. Sprint filed a lawsuit against the merger back in September claiming that the ratification of such a deal would create a duopoly. According to a Wired report, such a deal would have left the new and improved AT&T and Verizon Wireless with control of more than 75 percent of the market, slowly but surely burying Sprint and other wireless competitors who lack the liquid capital to join the merger war.

Although Sprint is yet to voice its official reaction to the deal, after hours trading numbers indicate a more than favorable reaction.

Meanwhile, consumers can rest assured that, to borrow from Deputy Attorney General James Cole, the “higher prices, fewer choices and lower quality products for mobile wireless services” that would have resulted from such a merger are no longer on the horizon.

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