Well, folks, it seems this was it. With AT&T's and Deutsche Telekom's withdrawal of the pending applications concerning the merger between AT&T and Deutsche Telekom's U.S. wireless operation, T-Mobile USA, a story of epic proportions and numerous twists and turns is about to come to an end. Still, you know what they say — it ain't over till it's over — and there's still some slight possibility of the deal actually happening, but as a whole, it looks like the sky's starting to get a bit gloomy over AT&Tville. Somewhere right now, with a tired look on his face, Mayor Ralph de la Vega (AT&T CEO) is lifting a glass of amber liquid, slowly uttering something in the lines of “Well, so much for my happy ending...
How it all began
C'mon, guys, don't be blue! (You too, Mayor!) Look on the bright side – at least we'll continue to have a total of four (more or less) major carriers in the U.S., presumably meaning greater competition. The more, the merrier, right? Since we have absolutely no intention of having our mood ruined because of these developments, we wanted to spend our time a bit more productively – by jumping right into our time-machine, and traveling back in time, all the way to March 20, when the news broke that AT&T is planning a “small” expansion
of the company by acquiring the nation's fourth-largest carrier, T-Mobile USA. It was like good-old AT&T knew what was coming
, and seemed to be well-prepared – the arguments for the acquisition were available, the price was set at $39 billion. According to the official information issued by AT&T itself, the merger with T-Mobile USA would have allowed it to offer a significant boost in overall service quality, but more importantly, it would have created great prospects for its upcoming LTE network, which would supposedly reach 95% of the population of the U.S. For those looking beyond the surface, however, it was clear that there wasn't much substance behind AT&T's jolly presentation slides. Back then, the deal looked like it's going to happen, but the DoJ and FCC were yet to respond to this application.
Me against the worldOne such person
who made a habit of looking beyond the surface during all these months was Dan Hesse, Sprint CEO. Understanding that his company may soon find itself in great disadvantage, Dan Hesse had no other choice but be the loudest opponent of the merger
. Not a single opportunity was missed by Mr. Hesse to explain his reasons to consider this deal bad for the industry, and by the looks of it, his efforts might have not been in vain. Interestingly though, there were some people who actually thought the opposite – that the AT&T-Mobile merger will be healthy for Sprint
, due to a number of reasons. But make no mistake, Dan held firmly to his belief that he must stop this wicked deed.
Meanwhile, AT&T was playing its own game, trying to convince the FCC
that it just has to allow the acquisition. Some of the primary reasons that were pointed out had to deal with eventual economic growth and new employment opportunities. Apparently, the carrier's vision was completely different from that of Sprint – AT&T claimed that the merger will actually promote competition and innovation, partly because of the better spectrum position AT&T was to acquire. Not only that, but it also thought that even after the acquisition, Sprint and Clearwire (of which Sprint owns 51%) would still be better positioned in terms of spectrum. So, apparently the FCC shouldn't have had to look so seriously at the proposed deal. However, final judgment was still a part of the distant future. Initially, it was expected that it'd be some time in Q1 2012
when we should see a final decision, however, this was later pushed back to June or July
next year, due to the numerous legal issues that AT&T had to face.
Don't mess with the Feds
The first real blow for AT&T and T-Mobile's sweet little undertaking came at the end of August, when the Department of Justice filed to block the $39 billion acquisition
, due to anti-competitive concerns. Apparently, unlike AT&T, the DoJ did see T-Mobile as a significant competitive force on the U.S. market, the elimination of which would cause “higher prices, poorer-quality services, fewer choices and fewer innovative products.” To make things worse, the FCC issued a statement of approval regarding the DoJ's decision. At this time, the enterprising folks over at AT&T have probably started to get a little nervous, knowing that if the deal doesn't go through, they'll have to pay Deutsche Telekom compensation fees to the tune of $3 billion. And who wants to split with such amount of money in these times of economic hardship? Oh, and of course, not to miss out on all the fun, Sprint was quick to join the lawsuit party
, started by the DoJ. This time, however, the third-largest carrier was not alone in this, as it was suddenly joined by regional carrier Cellular South
(now known as C Spire
) as well, for the same reasons.
But the media should always present all points of view, and that's exactly what we're going to do. On the other side of the barricade, AT&T was getting the loyal support of... T-Mobile and Verizon. In the middle of September, T-Mobile's Senior VP of Government Affairs, Tom Sugrue, decided that the time has come to voice his opinion
. Not surprisingly, his opinion largely mimicked the position of AT&T – that the proposed merger will generate innovation and job opportunities, as well as create “enhanced competition”. On the other hand, Verizon CEO Lowell McAdam was a bit more thoughtful
, explaining that the AT&T-Mobile merger is something like gravity
. (What?!) It had to occur, because T-Mobile had the needed spectrum to perform well, but didn't have the capital to build it out. Meanwhile, AT&T had the capital (obviously), but was short on spectrum, so, when you put 2 and 2 together, it appeared that Verizon's stance is that these companies should, kind of, get together.
Aaand this brings us to this Tuesday, when the other major institution in this case, besides the DoJ, the FCC, decided to have a say
in this whole thing. More specifically, FCC Chairman Julius Genachowski sent a draft order to his fellow commissioners, concluding that the FCC has found that the proposed deal will lead to a lower level of competition, as well as job cuts (instead of more jobs, as claimed by AT&T and T-Mobile). The result of this was that the Chairman wanted an administrative law judge to review the deal. Apparently, this has made AT&T and T-Mobile rethink their tactics, as it was announced today that they have withdrawn their application papers
from the Federal Communications Commission.
As we said in the beginning, it ain't over till it's over. And in this case, it isn't over yet, as AT&T and T-Mobile might still try to pursue their goal of merging together in the future, once the federal dust settles. For the time being, however, the weather forecast won't be pretty, over in the land of AT&Tville, where Mayor Ralph will have to think of new ways to build his LTE network up.