Dropped Call: AT&T Withdraws $39 Billion Bid for T-Mobile
In a sign that Big Business doesn’t always get what it wants from Washington, AT & T withdrew its $39 billion bid for T-Mobile on Monday. Federal regulators from the Department of Justice and the FCC concluded that the takeover bid, which would have turned AT&T into the US’s biggest wireless carrier, would have left customers with fewer choices and higher prices.
When the deal was announced in March, AT&T Chief Executive Officer Randall Stephenson spoke confidently, and (in hindsight) highly prematurely, of regulators approving the deal. Adding T-Mobile’s 33.7 million customers to AT&T’s 100.7 million subscribers would have meant that three-quarters of wireless users in the US would either be customers of AT&T or Verizon Wireless, which has 107.7 million customers. Critics of the deal contended that it would increase subscription costs: According to an analysis by Consumer Reports, T-Mobile’s monthly fees for wireless plans are about $15 – $50 less than comparable ones from AT&T.
Stephenson claimed that a merger would mean better service, more investment in faster networks and more wireless expansion in rural networks. But even after AT&T spent tens of millions of dollars to promote the deal and garnering the support of legislators, the FCC said that the merger would not benefit consumers by creating jobs — AT&T claimed 96,000 would arise from the deal — and by the expansion of wireless broadband. After the FCC announced its opposition, AT&T withdrew its application for approval on Thanksgiving day. Just this past weekend, AT&T had asked the Justice Department for a delay as it considered its options.
AT&T must now pay Deutsche Telekom, T-Mobile’s parent company, $4 billion in cash and wireless spectrum access as a breakup fee and must also enter into a “mutually beneficial” seven-year roaming agreement with the German carrier. Tero Kuittienen, an analyst, told the New York Times’s Dealbook blog that T-Mobile, the weakest of the four national wireless carriers in the US, has been “profoundly damaged” form the failed merger.
Advocates hailed AT&T’s withdraw as a victory for consumers. Said Andrew Jay Schwartzman, policy director of the Media Access Project to Politico:
“This proves that law trumps politics. I hope that it emboldens the FCC and the DOJ to take a tough position on future efforts to restrict competition in the wireless space.”
Thanks to the over 25,000 Care2 members who signed the petition to oppose this deal.
Related Care2 Coverage
Photo by jameskadamson