ATandT Hubris, Miscalculation Killed Merger

By Wayne Rash  |  Posted 2011-12-13 Print this article Print


But it wasn't Huvelle or the FCC that killed the merger; it was AT&T that delivered the self-inflicted fatal wound. AT&T approached the merger from a position of arrogance supplemented with lies. The company lied about how buying T-Mobile would somehow expand its coverage in the United States. It lied about job creation. It lied about the level of public support. An examination of the organizations and legislators backing the merger revealed a common thread: Each had received thousands of dollars from AT&T in return for support.

Compounding its problems, AT&T then had the hubris to blame the FCC for its regulatory problems and the Department of Justice for its legal problems.

Worse yet, AT&T tried to get the FCC and the DOJ to play off against each other, first by pulling its license application and then trying to continue its antitrust defense. The idea was that if AT&T prevailed, it could force the FCC to approve the license transfers. It was a desperate move and one that has now looks as if it will serve as the final nail in the merger's coffin.

Unfortunately, as AT&T flails about in desperation, it's creating a lot of collateral damage. AT&T is trying to stem the bleeding by running a nearly nonstop series of ads in all media that make it seem that the merger is still alive and tout what a good thing it will be. These ads mention nothing about the fact that AT&T has already announced that it will take a charge against profits to pay Deutsche Telekom the break-up fee for the failed merger. The ads did, however, play a role in the FCC's decision to release the staff report on the license-transfer application that AT&T is so upset about.

The damage is also hurting T-Mobile. While the company is aggressively courting new customers and for the first time is trying to sign up business customers, the uncertainty about the merger is surely playing a role in the steady departure of T-Mobile subscribers. I also suspect (but can't prove) that AT&T sold DT management on the idea that the merger would sail through the regulatory process. If DT had any idea that things could fall apart as they have, it's doubtful the company would have agreed to the deal.

One reason that DT wouldn't have agreed is because the company is already having serious financial and legal problems in Europe. While a quick sale of T-Mobile USA would help rescue DT from its European problems, a protracted legal battle is probably the last thing that the company needs. Now that the merger appears dead, DT is stuck with a subsidiary that has diminished value, a shrinking subscriber base and an image that has become tarnished by its association with AT&T.

So what's next? Now that AT&T finally realizes what the rest of the world already knows, which is that the merger is dead, there's been speculation that AT&T might enter into a joint venture that would let them share each other's networks more than they do now. But it's also possible, even likely, that T-Mobile will seek another suitor. Perhaps now it's Google's time to add a carrier to fill out its wireless presence. But that is a deal that is sure to raise antitrust and regulatory questions of its own.

Wayne Rash Wayne Rash is a Senior Analyst for eWEEK Labs and runs the magazineÔÇÖs Washington Bureau. Prior to joining eWEEK as a Senior Writer on wireless technology, he was a Senior Contributing Editor and previously a Senior Analyst in the InfoWorld Test Center. He was also a reviewer for Federal Computer Week and Information Security Magazine. Previously, he ran the reviews and events departments at CMP's InternetWeek.

He is a retired naval officer, a former principal at American Management Systems and a long-time columnist for Byte Magazine. He is a regular contributor to Plane & Pilot Magazine and The Washington Post.

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