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.
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