AT&T drops bid to acquire T-Mobile USA amid U.S. government opposition

AT&T Inc. said today that after a thorough review of options it has agreed with Deutsche Telekom AG to end its bid to acquire T-Mobile USA, which began in March of this year.

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.

“AT&T will continue to be aggressive in leading the mobile Internet revolution,” said Randall Stephenson, AT&T chairman and CEO, in the press release. “Over the past four years we have invested more in our networks than any other U.S. company. As a result, today we deliver best-in-class mobile broadband speeds – connecting smartphones, tablets and emerging devices at a record pace – and we are well under way with our nationwide 4G LTE deployment.

“To meet the needs of our customers, we will continue to invest,” 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.

To reflect the break-up considerations due Deutsche Telekom, AT&T will recognize a pretax accounting charge of $4 billion in the 4th quarter of 2011. Additionally, AT&T will enter a mutually beneficial roaming agreement with Deutsche Telekom.

Source: AT&T Inc.

Anton Troianovski reports for The Wall Street Journal, “Mr. Stephens said the real hit wouldn’t be that bad, because Uncle Sam will effectively pick up part of the tab. ‘I certainly expect that will be fully tax deductible,’ Mr. Stephens said, according to a transcript. ‘You guys can do the math on that, but essentially it is a much smaller cash impact than the first impressions may give you.'”

“Analysts at UBS AG did the math,” Troianovski reports. “Their take: The cash hit of the breakup fee after taxes would be $1.5 billion to $1.8 billion — as little as half of AT&T’s cash payment to Deutsche Telekom.”

Read more in the full article here.

MacDailyNews Take: In other words, AT&T will wait to see what things look like eleven months from now.

[Thanks to MacDailyNews Reader “Ben E.,” “GetMeOnTop,” “Robert S.,” and “Lynn Weiler” for the heads up.]

Related articles:
AT&T’s T-Mobile USA deal could be affected by U.S. 2012 election – November 29, 2011
Is the AT&T merger with T-Mobile USA dead? – November 23, 2011
U.S. FCC seeks review of AT&T merger with T-Mobile USA – November 22, 2011
Verizon CEO McAdam: AT&T should be allowed acquire T-Mobile USA – September 22, 2011
U.S. DOJ won’t explain decision to challenge AT&T’s purchase of T-Mobile USA – September 21, 2011

26 Comments

    1. hopefully Tmobile never gets the iPhone, and after Obama loses reelection a saner more fiscally responsible president takes over and AT&T can buy Tmobile then and expand its data capacity like it originally planned. Verizon already did this by buying up capacity, no good reason AT&T can’t do the same. The idea that a large number of carriers will have enough data bandwidth to compete in the world of high speed wireless data is pure fantasy.

      The best way to give consumers choice is to mandate a unified nationwide wireless standard and better yet go with the prevailing global standard.

      1. AT&T could build 3 brand new networks from scratch for what they were planning to pay for T-mobile. This deal was all about reducing competition and screwing over consumers. If AT&T gave a rat’s ass about you or me they’d do less whining, less merging, and more building.

        1. this is complete idiotic bullshit. There’s not an unlimited amount of available bandwidth this is heavily regulated, also no carrier can freely install towers anywhere they please this requires huge time wasting process that can take years for a single tower in some areas, forget installing dozens of towers required to satisfy the exponentially growing demand for wireless bandwidth.

          Consumers got horribly screwed by this as it effectively gives Verizon a complete and unstoppable monopoly on high speed wireless bandwidth with adequate coverage and capacity. They were already able to buy the bandwidth that AT&T is trying to purchase.

          We got screwed by this as consumer, and the mindless misinformed “consumer advocacy” groups and the shills that parrot their false arguments can all take credit for it.

          1. You can say that carriers can’t install towers anywhere they please as much as you want. And at some level that is true.

            But it sure as hell ain’t stopping Verizon from rolling out new 4G towers like crazy. Granted, they may not be putting them every single place that they please, but they are certainly getting new ones out there in force…as well as bolstering existing ones.

            1. Are they actually new towers? Or are they just upgrades to existing ones?

              Let’s not forget: Verizon is widely regarded as the ‘best network’ because they already did what AT&T is trying to do. Why was it okay for them but not AT&T?

            2. This comment is mis-informed. LTE deployment utilizes towers already in place. Frankly, this issue isn’t about cell towers though, it is about digital spectrum. Spectrum is something Verizon has a boat load more of than AT&T and AT&T was trying to buy more through this merger. AT&T was in fact in the process of selling off a lot of TMobile’s assets (read towers), so they could get the merger to work. This was a pure play of trying to expand the amount of spectrum they require to stop dropping calls. “Can you hear me now?” Yes, you can with Verizon b/c they have the spectrum they require to keep those calls connected.

      2. Obama did not kill the deal, bonehead. The Federal Communications Commission and the Department of Justice are the players in this area.

        The U.S. is down to four major wireless players and the market is dominated by two of those four – AT&T and Verizon. An oligopoly is bad enough as demonstrated by the current situation in the U.S. Why do you believe that it would be better to head most of the way towards a duopoly?

        Defining a nationwide wireless standard makes a lot of sense. I believe that we are headed in that direction with 4G. But I have no idea how you are tying that in to the AT&T/T-Mobile issue.

        1. There are not 4 major players in widespread nationwide ubiquitous high speed and high capacity wireless data bandwidth. There’s. It going to be either.

          There’s several reasons. Physics, high cost, massive regulations coupled with a cripplingly slow broken process to add towers, and limited bandwidth capacity available. Add incompatibility between networks if you want a fifth reason. TMobile is never going to have the capital or bandwidth or towers to seriously challenge Verizon or AT&T. Without this merger AT&T won’t be able to fill out its network to seriously challenge the strength of Verizon’s network. You effectively have one network this way not two. Unlikely Sprint will be able to be a seriously player and certainly no hope for Tmobile.

          I have yet to hear a single person who was against this merger address these serious issue. It has strictly been more competition good, consolidation bad; without any regard to that narrow minded stance and it’s dramatically negative consequences.

          1. Bs, bs, bs, bs. Everyone is a blind fool but you. That’s why they didn’t approve the merger. You got it all figured out. Yours are the only TRUE facts, everyone else is just lying.

            AT&T shill….

          2. You first paragraph is garbled, but my guess is that you are saying that there are only two major players in U.S. wireless. I did say that those two are dominant, but T-Mobile and Sprint cannot be overlooked or ignored. Consider Apple in the mid- to late-1990s…Microsoft probably considered Apple to be history. Now Apple is ascendant.

            You note some legitimate concerns, and I appreciate the cogent aspects of your posts. But it your viewpoint is clearly from one very rigid direction in which you emphasize a few issues and disregard other valid considerations and options. The fact that you erroneously brought Obama into your original post demonstrates this bias.

            It occurred to me last night that I have spent far too many hours posting in this forum, particularly in responding to political arguments and other non-Apple topics. Most of this time is wasted because I will not change anyone’s mind given the political polarization in the U.S. where facts are in the eye of the beholder. Everyone has biases, but it is impossible to debate with reason when people are unwilling to question their own beliefs. I am also tired of the myriad unregistered inflammatory posts that hijack this forum, and which MDN has been unwilling to address.

            So it’s time to back off and stop scrolling down to the feedback for a while. Most of the old acquaintances who posted on this forum are long gone, anyway.

            1. I should have let the Obama comment go, but regardless of my feelings about him, it was under his watch with a justice department he has considerable influence over that this deal was scuttled.

              I’m not trying to hijack this thread or any other with my political bias, but there’s no way to completely divorce this issue from politics.

              Without more bandwidth capacity there will be a default monopoly in full service high capacity wireless data coverage handed to Verizon. Without a significant technology leap there is no realistic hope for Sprint or Tmobile to close this gap. Only AT&T has the scale and money to really challenge Verizon. Without this deal you are looking at a pure monopoly, where we might at least have had 2 solid choices.

  1. Indeed they are lying in wait, MDN. Particularly looking to see the occupant of the White House. And if they think Fat Cat Romney will be measuring the drapes inside the oval office, preparing to let this jobs killing merger pass along with more tax cuts for the wealthy, they’ve got another thing coming. On January 20, 2013, Barack H. Obama will be sworn in for another term as President of the United States.

    Thank you, Mr. President, for preventing this anti-competitive monstrosity.

    1. I hope your wrong. Not saying a republican in office would magically solve all our problems. I’ve seen enough BS from both parties to mindlessly put faith in any political party. But Obama has been a complete disaster, far worse than McCain would have been. At least that man for all his failings had some character, Obama has none, and his promises for making things better with hope and change?

      Does anyone really still believe that?

      I already stated why I disagree with your take on this merger.

    1. To call it squandering our tax money is a bit disingenuous. The money belongs to the government; if they allow a write-off then it’s them who is determining who foots the bill (and by proxy it’s us since, in theory, the government answers to the people) and for what reasons.

      Point fingers all you like, but at least point them in the correct direction.

      1. It is *not* disingenuous in the least. Businesses, especially large businesses, consider the tax implications in any major move. AT&T took a stupid risk with the guarantee on the T-Mobile deal knowing that they could write off much of the payment if the deal did not go through. Therefore, AT&T knew that their risk posture was reduced by the backing of the U.S. taxpayers. Indeed, it would not surprise me if they intended that to act as leverage to push the deal through.

        The U.S. Government is of, by, and for the people. Therefore, the tax revenues belong to all citizens. You are correct that the government set the rules. But AT&T chose to leverage those rules in a particular way to support their acquisition strategy. They risked our tax money in a foolish manner and lost. Therefore, our money was squandered.

        I point the finger exactly where it should go, Kevin. Where in the ‘government’ would you point?

        1. Am I wrong to interpret the original statement as placing blame at AT&T, and NOT at the government (in other words, pointing the finger at AT&T, and not at the government)? It isn’t like the government did something which caused AT&T to offer a $4B incentive to T-Mobile to enter into negotiations. Nor was it government’s fault that the AT&T-Tmob deal was extremely disadvantageous to consumers, to the mobile market, to the US job market, etc? Between the two choices: approving the deal (that would have killed thousands of US jobs, created near-monopoly, eliminated the only cheap pre-paid GSM carrier and reduced even further any semblance of competition among the wireless carriers), or rejecting the deal (that will deprive it of some tax revenue from AT&T). They clearly made much better choice for the American consumer / tax payer.

  2. Well to say that this will be paid by the government is most certainly quite disingenuous. It would imply that the US government has to actually pay some billions of dollars to some entity because this deal didn’t go through. That is NOT the case. Because AT&T has made an agreement to pay $4 billion dollars in case this fails, AT&T will have a sizable hit on their revenues, which will reduce the amount of their taxes. So, the IRS will simply receive less money from AT&T than what they would have, had the deal been approved. The disingenuous part is making a business decisionof one company (promising a $B payout in case of failure) somehow a fault of the government.

    1. The effect is the same. You can label it whatever you want, but AT&T made a massive and ill-advised bet that was cushioned on the downside by the fact that the losses could be written off of whatever tax they actually pay. Taxes that would have gone to the entity that made the (correct) judgment to block the deal. It’s the corporgovapede…

      If I were an AT&T shareholder, I would initiate an action to remove the entire BoD and charge them with breach of fiduciary duty. I would then have the new BoD clean house on the upper corporate management. I am sick and tired of these people enriching themselves by playing around with shareholder money. It is disgraceful and illegal.

    2. The deal did not have to be blocked. The government has allowed Verizon to gobble up wireless bandwidth to the point of a near monopoly. But suddenly it’s not okay when AT&T wants to do the same thing?

      People are happy to vilify AT&T for their network but block their ability to address the issue.

      Such hypocrisy makes me ill. Do you own Verizon company stock by any chance?

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