Monday, November 28, 2011
AT&T Withdraws T-Mobile Offer, Promises New Push for Company
With the US Federal Communications Commission (FCC) last week blocking the $39 billion AT&T Wireless purchase of T-Mobile, the companies have withdrawn their application for the sale. But AT&T is planning an 11th-hour comeback, and might offer to sell off a large cache of T-Mobile assets in order to tip the opinions of regulators in their favor.
"AT&T and [T-Mobile owner] Deutsche Telekom are continuing to pursue the sale of Deutsche Telekom’s US 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 ... or [via] alternate means," a joint AT&T/Deutsche Telekom statement obtusely reads. "As soon as practical, AT&T and Deutsche Telekom intend to seek the necessary FCC approval."
According to multiple sources, AT&T is willing to sell off as much as 40 percent of T-Mobile's assets to some of the smaller players in the US cellular market—a move the company hopes will appease FCC and DOJ regulators. These regulators have charged that a merger of the two companies' wireless assets is anti-competitive and would cause job losses, as well as higher prices and reduced choices for consumers in the United States. AT&T also announced that it will take a $4 billion charge against earnings this quarter.
This is the amount the company agreed to forfeit to Deutsche Telekom even if the AT&T/T-Mobile merger wasn't approved. It's also coincidentally the cost that AT&T internally estimated it would need to spend to build its own LTE/4G wireless network in the United States from scratch. One has to wonder whether the company would have been better off just doing that, rather than pursuing a network merger that was sure to garner negative regulator attention.
Meanwhile, perhaps Deutsche Telekom can find another way out of the US cellular market. The semi-obvious choice is a Sprint/T-Mobile network merger, though critics will quickly point out that the two companies currently use incompatible wireless-network types. But the market-share numbers make sense: With Sprint controlling 17 percent of the US market and T-Mobile controlling 10 percent, the combined company would provide a strong third choice behind Verizon Wireless (34 percent) and AT&T Wireless (32 percent).
By Paul Thurrott - Windows IT Pro