AT&T has announced that after a thorough review of options with Deutsche Telekom AG, it has decided to end its bid to acquire T-Mobile USA.
Back in March 2011, AT&T surprised everyone by announcing that it will be acquiring T-Mobile USA from Germany’s Deutsche Telekom for $39 billion in stock and cash. However, the deal ran into rough weather last month when FCC Chairman Julius Genachowski indicated that he did not approve of the deal and stated that the matter should be sent to an administrative hearing, which was the first step towards blocking the proposal. This had forced AT&T to withdraw its T-Mobile merger application from FCC.
While AT&T claimed that it was withdrawing in order to better focus on all of their options and consolidate so that they can progress the merger, it was widely speculated that it was a sign that AT&T could end its bid to acquire T-Mobile USA very soon.
So not surprisingly, AT&T issued the following press statement to announce its decision to end its bid to acquire the fourth largest carrier in the US:
AT&T Inc. (NYSE: T) said today that after a thorough review of options it has agreed with Deutsche Telekom AG to end its bid to acquire T-Mobile USA, which began in March of this year.
The actions by the Federal Communications Commission and the Department of Justice to block this transaction do not change the realities of the U.S. wireless industry. It is one of the most fiercely competitive industries in the world, with a mounting need for more spectrum that has not diminished and must be addressed immediately. The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage. In the absence of such steps, customers will be harmed and needed investment will be stifled.
“AT&T will continue to be aggressive in leading the mobile Internet revolution,” said Randall Stephenson, AT&T chairman and CEO. “Over the past four years we have invested more in our networks than any other U.S. company. As a result, today we deliver best-in-class mobile broadband speeds – connecting smartphones, tablets and emerging devices at a record pace – and we are well under way with our nationwide 4G LTE deployment.
“To meet the needs of our customers, we will continue to invest,” Stephenson said. “However, adding capacity to meet these needs will require policymakers to do two things. First, in the near term, they should allow the free markets to work so that additional spectrum is available to meet the immediate needs of the U.S. wireless industry, including expeditiously approving our acquisition of unused Qualcomm spectrum currently pending before the FCC. Second, policymakers should enact legislation to meet our nation’s longer-term spectrum needs.
“The mobile Internet is a dynamic industry that can be a critical driver in restoring American economic growth and job creation, but only if companies are allowed to react quickly to customer needs and market forces,” Stephenson said.
To reflect the break-up considerations due Deutsche Telekom, AT&T will recognize a pretax accounting charge of $4 billion in the 4th quarter of 2011. Additionally, AT&T will enter a mutually beneficial roaming agreement with Deutsche Telekom.
It seems to have worked out quite well for T-Mobile USA as AT&T will have to pay it $4 billion as a break-up fee.
This is also good news for customers as they would have been the biggest losers with the merger. As Om Malik of GigaOM network had pointed out at the time of the merger announcement:
While AT&T and T-Mobile are going to try to spin it as a good deal to combine wireless spectrum assets, the fact is that T-Mobile USA is now out of the market.
T-Mobile USA has been fairly aggressive in offering cheaper voice and data plans as it has tried to compete with its larger brethren. The competition has kept the prices in the market low enough. This has worked well for U.S. consumers. With the merger of AT&T & T-Mobile, the market is now reduced to three national players – AT&T, Verizon and Sprint. Net-net U.S. consumers are going to lose.
What do you think? Let us know your thoughts in the comments.
[via AT&T]
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