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AT&T (NYSE:T) and Deutsche Telekom have decided to drop plans to sell T-Mobile USA to AT&T for $39 billion. In a Dec. 19 statement released today, AT&T said that the companies have dropped their acquisition. In its statement, AT&T blamed the efforts of the Federal Communications Commission and the U.S. Department of Justice for the failure of the merger, and said that the failure of the transaction doesn’t change the realities of the country’s wireless industry.
AT&T claimed that the takeover of T-Mobile would have ensured that the company had the spectrum it needed, apparently in contrast to the means that Verizon Wireless used to acquire spectrum for far less money by simply buying it from companies that didn’t have plans to use it
The word of the failed merger caught opponents by surprise, since most were waiting for the scheduled Jan. 18 hearing in federal court for the merger to be abandoned.
“This has been clearly the way things were going since Thanksgiving when the FCC had announced they were putting this out as a hearing,” said Public Knowledge Legal Director Harold Feld in an interview with eWEEK. “It was almost a certainty last week when [Judge Ellen Huvelle] expressed such skepticism. It’s a good thing that the companies finally realized that this wasn’t going to happen.
Public Knowledge has been a leading organization in fighting the merger.
Meanwhile, other public interest groups were adding their thoughts.
“This deal has been as good as dead for months because the facts never matched AT&T’s fabrications about the benefits of the merger,” Free Press President and CEO Craig Aaron wrote in a statement.
“As the public, the Justice Department and the FCC long ago recognized-and now even AT&T must admit-this deal would have only meant higher prices, fewer choices and tens of thousands of lost American jobs,” Aaron added. “Good riddance. The Obama administration deserves praise and credit for standing up to AT&T’s relentless lobbying and propaganda. And the American public can breathe a sigh of relief that this time the public interest trumped AT&T’s self-serving attempt to kill off what little competition remains in the wireless market.”
Feld also credited the FCC, the DOJ and the Obama administration.
“I think that the important thing here is that the American people can see that the FCC and the Department of Justice are capable of standing up when the moment requires, I think the Obama administration deserves credit for standing up to AT&T’s lobbying machine on this,” said Feld.
Some Viewed the Announcement as an Early Holiday Gift
Consumers Union, the nonprofit organization that publishes Consumer Reports, had opposed the merger from the day it was announced, as it pointed out in a prepared statement, “It’s an early holiday gift for consumers. From the first day that this deal was announced, we have warned regulators, lawmakers, and consumers of the dangerous consequences of this merger.”
AT&T for its part promised to be “aggressive in leading the mobile Internet revolution,” CEO Randall Stephenson said in the company’s prepared statement. Stephenson also claimed that AT&T delivered best-in-class mobile broadband speeds. He also called on policymakers to allow free markets to work to make additional spectrum available, including through legislation to meet long-term spectrum needs.
Now that the deal is off, AT&T must now also pay T-Mobile’s parent company a $4 billion breakup fee. In addition, AT&T is also entering into a mutually beneficial roaming agreement with Deutsche Telekom.
However, Deutsche Telekom sources have told eWEEK that the German company thinks the $4 billion fee is not sufficient to meet the requirements of the merger agreement, and that Deutsche Telekom plans to demand a greater breakup fee and some spectrum concessions from AT&T.
But the end of the AT&T-T-Mobile merger doesn’t mean an end to the competitive issues of smaller cellular carriers.
“I am pleased that AT&T dropped its bid to acquire T-Mobile, but competitive concerns still remain,” Rural Cellular Association President and CEO Steven K. Berry wrote in a statement. “Competitive carriers still face significant challenges, including data roaming, interoperability, access to devices and access to usable spectrum. While today’s announcement was a step in the right direction, there is still work to be done. The FCC must ensure a wireless ecosystem that is fueled by competitive policies.”
Some of the issues that remain for smaller carriers are high roaming charges and the cost of backhaul, both of which limit the ability of rural and other smaller carriers to compete with the giants such as AT&T. The costs of these services, as well as the availability of mobile devices were part of the antitrust suits filed by C-Spire and Sprint, and the end of the merger leaves these issues unresolved.
“Earlier today, AT&T terminated its definitive merger agreement with Deutsche Telekom to acquire T-Mobile USA,” according to a Sprint statement. “This is the right decision for consumers, competition and innovation in the wireless industry.”
While agreeing that it was a bad deal, FCC Chairman Julius Genachowski wrote that more needs to be done to improve the country’s wireless industry.
“The FCC is committed to ensuring a competitive mobile marketplace that drives innovation and investment, creates jobs and benefits consumers,” said Genachowski. “This deal would have done the opposite. The U.S. mobile industry leads the world in mobile innovation, and we agree with AT&T that Congress should pass incentive auction legislation that will unleash new spectrum for mobile broadband.”
Still, the announcement that the merger was dead was good news for the dozens of groups and companies that opposed it. “Today’s announcement proves that law trumps politics,” Media Access Project Senior Vice President and Policy Director Jay Schwartzman said in a prepared statement. “This anti-competitive transaction clearly exceeded permissible standards. AT&T and T-Mobile thought they could push it through by using lobbyists and political pressure, but the FCC and Department of Justice held firm.”
Ultimately, the failure came because AT&T, as it always has done in the past, believed that it could lobby its way past any opposition and any stumbling block produced by the administration or the FCC. There’s little question that it convinced Deutsche Telekom that the merger would sail through the regulatory process without so much as a hiccup.
But it turns out AT&T was wrong. Despite its millions of dollars in lobbying funds spent to influence dozens of politicians from both parties, and despite millions more spent in television, radio and newspaper ads used to spread propaganda, it wasn’t enough. This time, AT&T failed.