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AT&T withdraws T-Mobile merger papers from the FCC, will book the break-up fee as a loss in Q4

Posted: , by Daniel P.

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AT&T withdraws T-Mobile merger papers from the FCC, will book the break-up fee as a loss in Q4
After the FCC Chairman himself asked for an investigation into the AT&T's proposed merger with T-Mobile, America's second largest carrier waved the white flag, and has apparently withdrawn electronically the merger application papers from the Federal Communications Commission.

Deutsche Telekom and AT&T are still planning to pursue a deal if the federal dust settles, but with the increased likelihood that the authorities are willing to shoot down the $39 billion merger no matter how the carriers spin it as it is, AT&T basically acknowledges that the chances are slim to none at this time, since it needs both DoJ and FCC approval.

Moreover, it seems that its accountants will be provisionally booking a $4 billion loss on the whole endeavor that started in the spring. $3 million is AT&T's contractual obligation to pay a break-up fee if the deal doesn't get regulatory approval, and $1 billion is for the book value of the spectrum in question.


DALLAS--(BUSINESS WIRE)--On Nov. 22, 2011, the Federal Communications Commission indicated a proposed order was circulating that would designate for hearing the applications of AT&T Inc. and Deutsche Telekom AG For Consent To Assign or Transfer Control of Licenses and Authorizations, WT Docket No. 11-65. On November 23, 2011, AT&T Inc. and Deutsche Telekom AG electronically withdrew without prejudice, as of that date, the pending applications listed in the Public Notice released by the Federal Communications Commission on April 28, 2011 in that proceeding. Associated manual notification of withdrawal filings also are being made.

AT&T Inc. and Deutsche Telekom AG are continuing to pursue the sale of Deutsche Telekom’s U.S. wireless assets to AT&T and are taking this step to facilitate the consideration of all options at the FCC and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice, either through the litigation pending before the United States District Court for the District of Columbia, Case No. 1:11-cv-01560 (ESH) or alternate means. As soon as practical, AT&T Inc. and Deutsche Telekom AG intend to seek the necessary FCC approval.

As a result of the FCC’s action, AT&T expects to recognize a pretax accounting charge of $4 billion ($3 billion cash and $1 billion book value of spectrum) in the 4th quarter of 2011 to reflect the potential break up fees due Deutsche Telekom in the event the transaction does not receive regulatory approval.


Looks like the mammoth carrier that would have been created by the merger won't occur, and Amazon should have included T-Mobile in its Black Friday penny sale. Now the question is how will T-Mobile do on its own, despite that the $4 billion in fees will pad DT's bottomline pretty.

source: AT&T

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posted on 24 Nov 2011, 03:53 3

1. Packer29 (Posts: 56; Member since: 10 Sep 2011)


I know that some tmobile customers are happy with this and to boot Att has to eat that loss and Hesse is celebrating big time!

posted on 24 Nov 2011, 07:12 2

10. Trainer (Posts: 23; Member since: 03 Nov 2011)


Yeah, but now what for T-Mobile? DT still doesn't want them. Are there any other buyers out there? Or, will DT just let T-Mobile die a slow death and let them go bankrupt? No way DT invests money for an LTE build out. T-Mobile is walking dead, and it saddens me to see it. I've been with them for 12yrs.

posted on 24 Nov 2011, 10:05

25. hepresearch (unregistered)


Sprint can try to buy them... then they will have so many network technologies in their mobile mash-up that there will be no hope of integrating it all until it is all replaced by LTE-Advanced. And their customer base will be near 70 to 80 million... putting them more in the game with VZW and AT&T.

(note: extreme sarcasm intended...)

posted on 24 Nov 2011, 10:09 1

26. ardent1 (Posts: 1997; Member since: 16 Apr 2011)


The Sprint-Nextel acqusition was a model of how NOT to do an acquisition.

posted on 24 Nov 2011, 10:32

29. hepresearch (unregistered)


haha... truly. I was there during the acquisition of Nextel. On the Sprint end, it was a free-for-all of convincing Nextel clients to switch to Sprint en-mass. As a B2B consultant, I made twice my salary in commissions that year... sold over 1,500 phones to enterprise clients in south-central PA (Shentel and Phili markets). We were instructed by our managers specifically to take advantage of the Nextel acquisition... can you say economic-cannibalism? Beyond that, it was so convoluted and messy otherwise that I am amazed they managed to hang on to any old Nextel subscribers.

posted on 24 Nov 2011, 10:17

27. ardent1 (Posts: 1997; Member since: 16 Apr 2011)


Check out this link on the Sprint-Nextel merger (it's toward the bottom and was the last example before the conclusion):

http://www.investopedia.com/articles/financial-theory/08/merger-acquisition-disasters.asp#axzz1edjCCcLt

Yes, it was a freaking disaster -- a $35 billion deal that became a nightmare.

posted on 24 Nov 2011, 10:37

30. hepresearch (unregistered)


mmm hmmm... that is how it goes when you think that the customer base is what you are really buying the rights to... it does not work that way in reality, so Sprint put themselves in that raw-deal position by thinking the way they did at the time. The iDEN network has been a blemish on Sprint ever since, and it was never worth even a fraction of the $35 billion they spent (they knew that, and still spent the money based on their false economic premise).

posted on 24 Nov 2011, 16:06

37. snickers (Posts: 3; Member since: 21 Oct 2011)


wonder if google would be interested? they might be looking to start as a carrier anyway.

http://www.phonearena.com/news/Is-Google-looking-to-debut-as-a-wireless-carrier_id22376

google with their moto android phone on its own network. complete google experience.

posted on 24 Nov 2011, 19:48 1

38. hepresearch (unregistered)


It is certainly plausible, especially considering that Google has already produced their own branded, as-yet-unreleased (as far as I know) SIM card...

Actually that is such a great idea that if no one else takes them up on buying T-Mobile USA first, and Google does not then try buying T-Mobile USA themselves, I will be a little surprised.

posted on 24 Nov 2011, 04:05 3

2. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)


Damn no iPhone for T-Mobile customers. I feel bad for them.

posted on 24 Nov 2011, 04:24 1

4. clevername (Posts: 1428; Member since: 11 Jul 2008)


Funny thing is the the merger is probably the reason why no iPhone for tmo happened.

posted on 24 Nov 2011, 04:27

5. snowgator (Posts: 3209; Member since: 19 Jan 2011)


Actually, I do too. They should have that choice, and we all thought they would as part of AT&T.

posted on 24 Nov 2011, 11:14

31. Johnny_Mnemonic (Posts: 240; Member since: 05 Oct 2011)


@taco T-Mobile don't no iphone to get good sells thats only for desperate providers like Sprint don't know how to survive

posted on 24 Nov 2011, 04:23 3

3. Droid_X_Doug (Posts: 5773; Member since: 22 Dec 2010)


Maybe now AT&T can spend the $ it was going to spend on the merger on its LTE network? Investing in the network - what a novel concept.

posted on 24 Nov 2011, 04:47 1

7. ardent1 (Posts: 1997; Member since: 16 Apr 2011)


ATT needs more spectrum. There\'s a limited amount of spectrum available -- T-mobile has spectrum but doesn\'t have the funds to build out it\'s network.

This is a sad day for the US wireless consumers because ATT doesn\'t have enough spectrum so it will be forced to raise its rates given their limited spectrum. T-mobile will continue to die a slow death by one thousand cuts unless the parent company provides the capital to build out the network and take advantage of the underutilized spectrum.

The winners are Verizon and Sprint because they can now raise rates piggybacking on ATT.

posted on 24 Nov 2011, 07:31 2

11. Slammer (Posts: 1030; Member since: 03 Jun 2010)


Ardent1,

AT&T is in no means hurting at this point for spectrum. Currently they hold a respectable percentage over the other carriers in which much has not been utilized. TmobileUSA's assets were not needed for AT&T to build on what they already have. Others as myself have contended in writing to the FCC, that AT&T's upper and lower spectrum holdings, should be sufficient in their goals. They need to use these holdings more effectively and efficiently before asking for more.

This was a clear and concise intent on the part of AT&T, to eliminate competiton. AT&T bidding on TmobileUSA just as Sprint announced their bid, was interesting timing.

In all reality here, mainstream consumers of the wireless industry that spend countless dollars for wireless service, should be celebrating a great victory. The FCC has proved that it does not suffer memory loss from the 1984 FCC mandated breakup of The Ma Bells.

John B.

posted on 24 Nov 2011, 09:49 1

22. ardent1 (Posts: 1997; Member since: 16 Apr 2011)


Dear John B.:

You clearly miss the point or the bigger picture or both the point and the bigger picture. Lowell McAdam of Verizon Wireless said it best (here I am paraphrasing Mr. McAdam): if the government blocks the ATT-T-Mobile merger, then it needs to come up with a plan for getting spectrum to meet the industry's growing demand.

Here are the facts. ATT has seen record increases in its subscriber base due to the iPhone franchise since the introduction of said smartphone, respectively. ATT has experienced numerous customer complaints of "dropped calls", which is a symptom of capacity constraints. ATT continues to realize new subscriber growth, mainly due to the continued success of the iPhone franchise as witnessed by the recent introduction of the iPhone 4S as well as the two best selling handsets (iPhone 4 and 3GS) in Q3:11, respectively.

It is not too difficult to realize the continued success of ATT's iPhone franchise is causing this capacity constraint. The capacity constraint is real and not imaged. The tremendous number of dropped calls are not mirages or figments of people's imaginations.

Your claim that ATT wants to eliminate competition is specious as T-Mobile is dying a death of a thousand cuts. As you know, T-mobile is the only carrier out of the top 4 carrier that does not offer the iPhone! T-mobile is losing customers due to customer defections as a result of the top 3 carriers NOW offering the iPhone 4S or 4, respectively. T-Mobile's parent compant DT has publicly stated it does want to invest the necessary funds to build T-Mobile's network. Just look at T-mobile's subscriber base over the past few years -- it's declining and the trend is decidedly negative.

> AT&T bidding on TmobileUSA just as Sprint announced their bid, was interesting timing.

Oh please!! Did you suffer memory loss from what happened when Sprint acquired Nextel. Give us a break. Sprint doesn't have the skills or management talent OR the CREDIT RATING to finance, complete, and successfully integrate said prospective merger, respectively. Sprint is a junk rated companies that hasn't made money in 16 consecutive quarters (per Bloomberg.com). Additionally, Sprint practically bet the farm with the new iPhone contract. Sprint is in no shape to acquire T-mobile.

-Ardent One

posted on 24 Nov 2011, 13:24 1

33. Slammer (Posts: 1030; Member since: 03 Jun 2010)


Ardent1,

Please review my post and then review your own. If you break down your first three paragraphs, you will clearly see that my intended post of AT&T hoarding precious "unused" spectrum, should've fully explained the truth. Their acquired and unused spectrum from auctions 7 years ago, not only would help eliminate most of their respective requests for more spectrum, but also would've solved most of the past issues of their network not related to the normal dropped call issues of GSM technology. AT&T has had the ample time, capability and spectrum to upgrade their network to run far more efficiently shortly after acquiring the exclusivity of the iPhone. In Short Ardent, AT&T sat on their "assets" and chose not to utilize their holdings knowing that the iPhone could not be obtained through other sources. Thus making it their fault for the constraints.

Please understand my position as an adult in years to appeal any inconsistancies I find misrepresented by carriers trying to parry information. I have spent half of my 50 years building a logic of the basics of the industry as well as the complexities that come with them.

I am fully aware of the spectrum crunch that will be facing the industry. We must also realize the FCC will be releasing more spectrum in the near future for broadband use. We must also realize AT&T's request to acquire 700Mhz spectrum held by Qualcomm, has been granted by the FCC. Other than Clearwire, AT&T is least hurting for spectrum.

Lowell's speech was important, but also not needed. He simply reiterated what everyone already knew. Verizon will need the spectrum before AT&T.

Whether you want to understand or believe what I say, AT&T has tried to shutter the truth on their interests in Tmobile. Sprint's financial position is moot under the realism of AT&T's scheme. However, AT&T was not going to allow the Nation's third largest carrier become even larger.

John B.

posted on 24 Nov 2011, 09:17

16. Sniggly (Posts: 7033; Member since: 05 Dec 2009)


Ardent, should I start keeping track of all of your predictions just to see which ones come true and which are complete bulls**t?

posted on 24 Nov 2011, 09:24

19. ardent1 (Posts: 1997; Member since: 16 Apr 2011)


To Sniggly, the man with foot in mouth disease:

If one-tenth of my predictions came true, I would be the first trillionaire. They are call predictions for a reason. Or is that too difficult for you to understand?

posted on 24 Nov 2011, 09:40

21. Sniggly (Posts: 7033; Member since: 05 Dec 2009)


Ardent,

I would really love it if you could link me to the original article we had an interaction on. If you can't, then just shut the hell up with your bitterness.

You've already predicted that prepaid carriers will take over from contract carriers while ignoring that the contract carriers are the only companies with the capital to pay for network maintenance and expansion. Now you're claiming that AT&T will raise its rates while T-Mobile dies as a company.

I may put my foot in my mouth sometimes, but at least I'm not full of s**t.

posted on 24 Nov 2011, 09:58

23. ardent1 (Posts: 1997; Member since: 16 Apr 2011)


Sniggly -- since you are too dense, then Kindly find that EXACT post where I GAVE YOU A TIMEFRAME. I never gave you one a timeframe.

My main thesis that I stated was: Prepaid carriers (including no-contract like Metro PCS or Cricket) are taking shares from contract carriers and will continue to take share mainly because of the prepaid smartphones value proposition. Metro PCS has 9.1+ million customers and 30% are using smartphones since it was introduced in 12/2010!

The rest is your PETTY imagination out of your own bitterness.

Twist my words all you want given your desperation.

Lastly, the carriers already RAISED RATES when they curtailed unlimited data plans.

Sniggly, please get with the program. Also, I am NOT responsible if YOU CAN'T READ and UNDERSTAND what I WROTE!!!!

posted on 24 Nov 2011, 10:26 2

28. Sniggly (Posts: 7033; Member since: 05 Dec 2009)


You are a very angry individual. I never said you gave a timeline. I just thought the projection that prepaids would take more and more customers from contract carriers was silly. The prepaids couldn't handle the load created by a significant amount of contract churn. Furthermore, the cost of data plans did not rise. In fact, for AT&T it dropped when they capped plans. Also, pricing has dropped for broadband card caps.

Sooooo.. it's not a problem if you make a prediction which eventually turns out to be incorrect. However, you could at least consider facts which render your ideas invalid immediately.

posted on 24 Nov 2011, 13:39

34. Droid_X_Doug (Posts: 5773; Member since: 22 Dec 2010)


Yes, ardent appears to be one angry individual. When I have encountered such anger in the past, there has usually been a motivating factor that was usually economic in nature - contracts that were lost out on, financial positions in the market that became worthless, and, and, and.

I wonder what ardent's story is.

posted on 24 Nov 2011, 14:49

36. RORYREVOLUTION (Posts: 2984; Member since: 12 Jan 2010)


lol calm down ardent, it's going to be okay....

posted on 24 Nov 2011, 04:32

6. snowgator (Posts: 3209; Member since: 19 Jan 2011)


I am really, really surprised this didn't go through. Points to all the proponets and especially Dan Hesse for his tenacity. He and Sprint look justified.

I am sure T-Mo is anything but secure, though. Their parent company wants out of the US market. They know the Euro market, and are focused on it.

AT&T needs to regroup. A lot of effort and cash has been lost. As it looks as though I am staying with them, I am with Doug_X_Doug- improve your own network. In the long run, this might be better for them. It would have been several years of work to get this merger settled.

posted on 24 Nov 2011, 07:49

12. Slammer (Posts: 1030; Member since: 03 Jun 2010)


---" AT&T needs to regroup. A lot of effort and cash has been lost. As it looks as though I am staying with them, I am with Doug_X_Doug- improve your own network. In the long run, this might be better for them."---

In long run, this is better for EVERYONE.

AT&T will not totally regroup. It is in a position in which it feels comfortable with. It has been the rich offspring of the bells broken up years ago and will continue its path to try and monopolize as well as dominate the industry.

Remember, they have temporarily ceased interest knowing a defeat. However, they have left the door open for another try. This proves the path I mentioned above.

John B.

posted on 24 Nov 2011, 10:02

24. ardent1 (Posts: 1997; Member since: 16 Apr 2011)


> It has been the rich offspring of the bells broken up years ago and will continue its path to try and monopolize as well as dominate the industry.

AT&T was almost driven to the ground with it's cable ventures. Remember the billions and billions of dollars it had borrowed in the capital market. Did you remember how low ATT's debt rating was?

Oh, did you also forget that too.

posted on 24 Nov 2011, 14:04

35. Slammer (Posts: 1030; Member since: 03 Jun 2010)


Please Ardent,

Do not follow suit with following people as a receptionist of correcting individuals without proper facts. I sense you are more intelligent than that.

The rich can claim poverty even though retaining far more wealth than the rest of us. Just as AT&T has many times from the beginning up to this merge fiasco.

I haven't the time to write the in depth history of AT&T. So I have included the following link for you to read and understand at your discretion the monopolistic nature of said company, how it became to be and why it is in their DNA to continue this direction.

http://www.fundinguniverse.com/company-histories/ATamp;T-Corporation-Company-History.html

John B.

posted on 24 Nov 2011, 05:26 1

8. The_Miz (Posts: 1496; Member since: 06 Apr 2011)


Course, now AT&T should sue the gov't for punitive damages. Lol, it's not like they can do anything since the gov't is so broke from all the spending.

posted on 24 Nov 2011, 08:15

13. Slammer (Posts: 1030; Member since: 03 Jun 2010)


If anything, it's the wireless consumers that were spared punitive damages that would have incurred through the merge of TmobileUSA and AT&T.

AT&T handing over a ton of bribe cash in trying to push for a succesful merge, is their fault. If an obvious legitimate need of TmobileUSA would have been presented, the merge most likely would have proved successful. However, to squander millions and millions of dollars to try and quell competition, is a misrepresentation of anti-competitive measures that serves no good for public interest. The FCC has effectively viewed this as a detriment and wisely played the winning game for us consumers.

John B.

posted on 24 Nov 2011, 05:57

9. HTCiscool (Posts: 449; Member since: 16 Jul 2011)


Well I knew it would never happen

posted on 24 Nov 2011, 08:38

14. vvelez5 (Posts: 623; Member since: 29 Jan 2011)


Bad day for capitalism today. Well I guess AT&T can use that $35 Billion now to invest into its own LTE expansion. Now DT is stuck with a company they don\'t want.

posted on 24 Nov 2011, 08:44

15. vvelez5 (Posts: 623; Member since: 29 Jan 2011)


Didn\'t read the whole thing. DT and AT&T are still pursuing this thing with the DOJ and are only withdrawing from the FCC and will later pursue it through the FCC. I guess that $4 Billion dollar fee is something they just want to get out of the way and most likely DT will lower the final price by $4 Billion.

posted on 24 Nov 2011, 09:20

17. Sniggly (Posts: 7033; Member since: 05 Dec 2009)


This is going to be a big blow to people. There were a lot of customers relying on that merger going through.

The fortunate thing is that T-Mobile will now be able to continue offering its dirt cheap plans without AT&T axing them.

posted on 24 Nov 2011, 09:21

18. Droid_X_Doug (Posts: 5773; Member since: 22 Dec 2010)


Lots of luck getting the DoJ to agree to the merger. Maybe if an R gets to be POTUS, but I suspect T-Mo will have been old to someone else by then. DT is going to be cutting their losses and fast. Expect a sale of T-Mo to probably Sprint within 6 months.

posted on 24 Nov 2011, 09:25

20. Droid_X_Doug (Posts: 5773; Member since: 22 Dec 2010)


T-Mo could also be sold to one of the super-regionals like MetoPCS. But sold it will be and sooner rather than later.

posted on 24 Nov 2011, 11:20

32. Johnny_Mnemonic (Posts: 240; Member since: 05 Oct 2011)


Jajajajajaja. At&t thought It had control it backfire jajajajajajaja no T-Mobile for you at&t

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