Anti-trust Lawsuit Sinks Deal
The saga of AT&T’s efforts to purchase T-Mobile extend all the way back to the first announcement of the plan in March. The agreement, which would have merged the nation’s second largest and fourth largest wireless carriers, immediately began to draw the ire of anti-trust watchdogs and the scrutiny of the FCC and the Obama administration. In August, the Justice Department sued to block the deal that would have left the nation with only three wireless carriers and with Verizon Communications (VZ) and AT&T holding 75 percent of the nation’s customers, stating in the suit that “because we believe the combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for their mobile wireless services.”
The legal battle took an odd turn last week when AT&T tried to pull its FCC filing to concentrate on the Justice Department suit, only to have a Federal Judge hold off on a court date because of the lack of an official FCC filing. In the end, AT&T decided to pull the merger efforts, a decision that will require the company to pay a $3 billion fee to Deutsche Telekom. “This result is a victory for the millions of Americans who use mobile wireless telecommunications services,” Deputy U.S. Attorney General James Cole said. “A significant competitor remains in the marketplace and consumers will benefit from a quick resolution.”
Future Murky for T-Mobile, AT&T
Deutsche Telekom is clearly unhappy with the failure to sell the struggling T-Mobile despite the $3 billion cancellation fee. “For us, it is difficult to understand how a transaction that would have contributed significantly toward the realization of the U.S. national broadband plan to expand the geographic availability of fast Internet could be blocked,’’ René Obermann, Deutsche Telekom’s chief executive, said. “Neither agency appeared willing to back down from its fundamental opposition, despite concessions to modify the scope and structure of the transaction.’’
What the failed deal means for the future remains unclear. The deal, which was primarily oriented around the acquisition of increasingly valuable wireless spectrum, leaves AT&T and T-Mobile both scrambling for a new plan of action. Shares in DISH Network Corp. (DISH) jumped up nearly 9 percent on speculation that it and its chunk of wireless spectrum would be the next target for AT&T. AT&T is scrambling to compete after Verizon bought up close to $4 billion worth of wireless spectrum from cable companies earlier this month.