Home AT&T Plans Fall Apart, Throws In the Towel on T-Mobile Deal

AT&T Plans Fall Apart, Throws In the Towel on T-Mobile Deal

The nightmare is over. Or, hopes and dreams have been crushed. Really, it depends on what side of the argument you fell on but, as of now, it is moot: AT&T and T-Mobile have dropped their $39 billion merger bid and will remain two separate, unaffiliated companies.

The competition will rejoice. Sprint, in particular, comes off as a big winner and CEO Dan Hesse will be vindicated for his crusade against the merger all year. Verizon, which took a “don’t look at us, we are just watching the circus” approach, probably does not benefit from its failure. AT&T had set aside $4 billion in breakup fees that it now needs to pay Deutsche Telecom, the owners of T-Mobile. So, the biggest loser here is AT&T. The company would also like consumers to believe they are the losers as well.

According to AT&T’s corporate site, here are the pertinent bits of the announcement:

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. 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.

“To meet the needs of our customers, we will continue to invest,” [CEO Randall] Stephenson said. “However, adding capacity to meet these needs will require policymakers to do two things. First, in the near term, they should allow the free markets to work so that additional spectrum is available to meet the immediate needs of the U.S. wireless industry, including expeditiously approving our acquisition of unused Qualcomm spectrum currently pending before the FCC. Second, policymakers should enact legislation to meet our nation’s longer-term spectrum needs.

“The mobile Internet is a dynamic industry that can be a critical driver in restoring American economic growth and job creation, but only if companies are allowed to react quickly to customer needs and market forces,” Stephenson said.

The Federal Communications Commission took its first crack at the deal in May, about a month and a half after the merger was announced. That announcement fell on the day before CTIA’s main wireless conference of the year in Orlando. There was an awkward panel at CTIA where the CEO’s of Sprint (Hesse), AT&T (Ralph de La Vega) and Verizon (Dan Mead) as the three of the most influential men in wireless were peppered with questions from Mad Money’s Jim Cramer.

Later in the year, the Department of Justice got in on the act against the merger and the writing was on the wall that the merger would likely not go through. The longer the process dragged on, the more money AT&T stood to lose both on infrastructure development and legal fees. We noted in September that it would be easy for a three carrier environment dominated by Verizon and AT&T to collude on price-fixing without actually have to communicate with each other.

AT&T was betting the house on the notion that it could increase the pace of innovation, provide broadband service to 99.9% of Americans, create jobs and make the U.S. more competitive in the global wireless market. Sprint fought back, saying that none of this would be true and that Sprint would get squeezed out of the market by the dominant duo on top of the food chain.

Now it is finally over and the U.S. will remain a market with four large cellular carriers. AT&T and T-Mobile customers: how do you feel about this, since you were probably the most likely to benefit from the merger? Sprint fans, is this a win? Or is all of this billion-dollar merger just corporate shenanigans that you could care less about. Let us know in the comments.

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