AT&T has put an end to its $39 billion quest to take over T-Mobile Monday, announcing that it will decline to challenge the FCC’s claims that the deal would lead to fewer consumer choices, poor service and higher prices.
The proposed deal with T-Mobile’s parent company, Deutsche Telekom, announced in March, was supposed to increase the company’s ability to extend service throughout the U.S., according to AT&T.
Mounting Opposition
The proposal was supported by some major tech players, including Facebook, Microsoft and Research In Motion; however, the deal faced stiff opposition from consumer advocacy groups and wireless competitors, most notably Sprint, who said that the deal would create a duopoly and lead to a decrease in innovation and increased prices.
The deal would have combined the second-largest and fourth-largest carriers in the U.S., making it the country’s largest provider.
The FCC and the Department of Justice recently objected to the deal, with the latter launching a lawsuit last August.
When the FCC aired its grievances regarding the proposal last month, it was clear the deal was facing an uphill battle.
“AT&T realized the hurdles that confronted it from both the FCC and DoJ. AT&T faced significant challenges given the skepticism from both agencies,” Michael Carrier, law professor at Rutgers School of Law, told the E-Commerce Times.
AT&T this week reiterated its concerns that blocking the buyout would only prolong a spectrum shortage.
AT&T’s stock was trading down after hours but took a turn upwards into the morning, while Sprint and Verizon were both up.
AT&T denied our requests to comment beyond the press release.
The Losers
“The biggest loser here is Deutsche Telekom because it has planned to exit the U.S. for a long time, and this episode made it waste several months. Besides, the offer from AT&T was great from Deutsche Telekom’s viewpoint,” Aapo Markkanen, senior analyst in consumer mobility at ABI Research, told the E-Commerce Times.
DT will receive about $4 billion from AT&T in a breakup fee agreed upon before the deal was announced. The companies will also enter into a roaming agreement.
However, DT also still has T-Mobile on its hands, and that carrier now faces a fiercely competitive market with no hope of being sheltered by AT&T. Because DT is so heavily invested in Europe and may still be eager to rid itself of T-Mobile, the smallest of the major U.S. providers might be facing the rockiest road ahead.
“I’m not convinced that the FCC ever thought this through from this angle — does having a weak and potentially under-investing T-Mobile really benefit the mobile consumers as a whole?” Markkanen said.
The Winners
Sprint, on the other hand, got the results it’s advocated for since March. The wireless provider vocally opposed the deal, saying AT&T didn’t actually need the spectrum and warning the deal would actually be bad for consumers.
“Today’s telecoms business is more and more a scale-driven business, and now Sprint won’t be lagging that much behind in terms of scale. However, the fact that T-Mobile remains in the picture for now doesn’t change the fact that Sprint itself remains small, and it will have to invest substantially in the next years,” said Markkanen.
The biggest winner, though, might be the FCC and the Department of Justice. The federal agencies were able to flex their muscles and uphold antitrust laws.
“This shows that antitrust law still has teeth. Many mergers have been allowed in recent years, but this shows that if a merger would lead to too much market power, with not enough justifications, it could be challenged,” said Carrier.
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