NEWS ANALYSIS: AT&T made a number of bad decisions in the nine months between the announcement of its planned T-Mobile acquisition before finally giving up. The root causes were simple: arrogance and hubris.
Nobody outside the executive
suites at Deutsche
Telekom and AT&T
really knows what was promised early in 2011 when the
management of the two telecommunications companies agreed that AT&T would
buy T-Mobile USA.
Most likely, the AT&T
executives did what they have done so often in the past, which is to say
exactly what the other executives wanted to hear-that the acquisition of
T-Mobile was a sure thing and that the $39 billion would be in Deutsche's hands
The Deutsche executives
probably believed them. After all, AT&T had millions of dollars in the
bank, a string of successful acquisitions behind it and the political clout
that was the stuff of legends. What Deutsche didn't know at the time is that
those legends were of AT&T's own making. But just to make sure that
Deutsche thought it was safe, AT&T promised the biggest break-up fee ever
if the deal fell through.
Deutsche Telekom wanted to
hear these words.
Despite the fact that
T-Mobile USA was its most profitable foreign division, the company was in
trouble. European Union courts had found that Deutsche was in violation of a
number of laws, had not followed through on court-ordered changes and was
racking up millions of Euros in fines. Worse, its other divisions were in
disarray. Some of the European divisions of T-Mobile were losing money, and the
only way that Deutsche was holding onto customers was because it was bundling a
variety of landline and wireless services that made dropping wireless services
But Deutsche's disarray made
the money even more attractive. The $39 billion was enough to solve all its
problems. At least that was the thinking at the time. But by the time people
got to take a look at the proposed acquisition, opposition started to grow, and
it grew fast.
AT&T countered the
growing opposition by public interest groups by doling out money to a wide
variety of groups, regardless of whether they had anything to do with wireless
communications, to write letters of support to the Federal Communications
Then AT&T did what
AT&T has done in the past. It started to spread money around to politicians
at every level to buy their support. The mayor
of Tallahassee, Fla.,
got a sweet consulting deal. Several members of Congress
got big donations to send a letter to
But by this time, the wheels
had already come off, and the merger was on its way out. But instead of looking
for a way to ease Justice Department concerns, AT&T launched a nearly nonstop
series of television and radio commercials and newspaper ads touting how their
planned merger would create nearly 100,000 new jobs.
AT&T used its influence,
mostly with people in Washington D.C., to push the line that its jobs
projections must be true.
How could someone make a
statement so seemingly contrary to the truth otherwise? Every AT&T merger
has resulted in massive job losses, and internal documents obtained by the FCC
and the Justice Department confirmed that. Once again, AT&T was trying to
get what it wanted using politics and money rather than by simply coming up
with a plan that might work.
Then in November, the future
began to be revealed, and it wasn't a future that AT&T wanted to see. Federal Communications Commission
Chairman Julius Genachowski
announced that he was proposing that the
license-transfer application be sent to an administrative law judge, which is
the FCC's way of killing it. Then, a few days later after AT&T and Deutsche
withdrew their license application, the
FCC released a damning staff report on the merger
By this point, the merger
was clearly in extremis
, but rather
than try to find a way to save the acquisition, AT&T issued a series of
harshly worded attacks against the Justice Department and the FCC. By this
point, Ellen Huvelle, the federal judge trying the antitrust lawsuit, was
clearly skeptical of AT&T. She set a hearing to decide whether the lawsuit
should even proceed.
By now, even AT&T
could see that it was over, and along with Deutsche
, cancelled the
acquisition in a flurry of defiant statements.
AT&T, if it demonstrated
nothing else, showed that you can't buy your way out of an antitrust lawsuit.
The brash group of Texans that run the company found out that being brash may
work in Dallas, but it doesn't help in Washington. But in the process, where
AT&T could have made a series of choices, it invariably chose the wrong
The job numbers? Did the
company really think no one would do the math?
The spectrum requirements?
Didn't they realize that spectrum assignments were public records, and that
eventually someone would notice that AT&T had the most?
Apparently, they didn't, or
the executives that run AT&T thought money could smooth everything over.
They couldn't, but in the process, they left a trail of broken promises and
Deutsche Telekom won't get
its $39 billion, and in the meantime, its legal woes in Europe mount.
T-Mobile USA will get some
badly needed spectrum and roaming agreements with AT&T, but DT still wants
to dump the division so it can focus on saving itself. Will it go to Google? Or
maybe Dish Network? Nobody knows.
And nobody knows what
AT&T might try to do next. Some believe that the acquisition will come to
life again if the Republican Party takes the White House in a year. Others suggest
that Deutsche will simply shut down T-Mobile, but that seems unlikely
considering its profitability. But right now, nobody knows, and that doesn't
help anyone, including AT&T, whose stockholders must be wondering why all
that money was wasted.