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Breaking: AT&T (s t) said it will drop its planned acquisition of T-Mobile and take a $4 billion charge against its fourth quarter earnings on Monday afternoon. This paves the way for new partners to emerge for T-Mobile and means AT&T will have to build its LTE network without taking out a competitor.
From AT&T’s statement:
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.
We’ll continue to update this story as we gather more reactions and analysis.
Update: AT&T set the wheels of the $39 billion acquisition in motion last March, shocking the public with the sheer size and apparent audacity of the deal.AT&T tried to justify the merger by stating that the resulting huge economies of scale would drive down prices for consumers, create new jobs, and allow AT&T to launch a robust and nationwide LTE network—something AT&T claimed it couldn’t do with its existing spectrum alone. The public outcry against AT&T, however, was huge. A few organizations such as Communications Workers of America sided with AT&T, while Verizon(s VZ) gave tacit support to the deal, but most every other operator, public policy, and consumer group roundly condemned the deal.
On the operator front, Sprint(s S) led the charge against the merger, filing an antitrust suit against AT&T and T-Mobile’s parent Deutsche Telekom, while CEO Dan Hesse harangued AT&T at every opportunity from every pulpit. In a recent interview with GigaOM, Hesse said AT&T’s announcement was a wake-up call for the entire industry, which had failed to address just how large AT&T and Verizon had become:
When AT&T announced its intention to take over T-Mobile USA, it made me realize the industry has been gradually moving toward being a duopoly and how tenuous the competitive situation is in the U.S. wireless industry. … [Before the merger was announced] I could see this gradual creep in size and market dominance of the big two—growing gradually each year, though not to the extent that it became alarming. But the attempted acquisition of T-Mobile set off all sorts of alarms and had you step back and notice what’s been happening each year for a number of years.
If the merger would have gone through Sprint would have become a far-distant third in a mobile industry dominated by AT&T and Verizon, while a competitive low-cost nationwide operator would have been removed from the competitive landscape, though AT&T pledged to maintain T-Mobile’s cheaper data plans for all of the operator’s current customers.
It turned out regulators had just as many problems with the deal as consumer groups and smaller operators. In August, the U.S Department of Justice said it would block the merger, filing an antitrust suit against AT&T and DT. In November, the FCC condemned the merger as well and used the most powerful weapon in its arsenal – sending it to an administrative hearing – to try to defeat it. Sensing it was loosing ground, AT&T tried to play for time. It yanked its petition from the FCC to focus on the DOJ suit only to encounter resistance to that tactic from the court hearing the antitrust case.
Last week, AT&T and DT put the deal on hold until next month as it searched for any available means to salvage the deal. As of Monday, it appears to have exhausted all possibilities, leading to it throwing in the towel.
Update: The minute AT&T’s withdrawal hit the wires the reaction statements started flooding in. The Free Press summed up its feelings in two words: “Good riddance.” It did, however, elaborate in a statement from CEO Craig Aaron:
This deal has been as good as dead for months because the facts never matched AT&T’s fabrications about the benefits of the merger. As the public, the Justice Department and the FCC long ago recognized — and now even AT&T must admit — this deal would have only meant higher prices, fewer choices and tens of thousands of lost American jobs. Good riddance. The Obama administration deserves praise and credit for standing up to AT&T’s relentless lobbying and propaganda. And the American public can breathe a sigh of relief that this time the public interest trumped AT&T’s self-serving attempt to kill off what little competition remains in the wireless market.
Sprint’s statement was almost subdued compared the unpulled punches its delivered over the last 9 months. From SVP of government affairs Vonya McCann:
This is the right decision for consumers, competition and innovation in the wireless industry. From the beginning, Sprint has stood with consumers who spoke loudly and clearly that AT&T’s proposed takeover of T-Mobile would create an undeniable duopoly that would have resulted in higher prices, less innovation and fewer choices for the American consumer.
U.S. Senator Al Franken (D-Minn); who chairs the Senate Judiciary Subcommittee on Privacy, Technology and the Law; also emphasized the duopolistic aspects of the failed deal:
This merger would have put us one step away from the monopoly we had during the Ma Bell years. Wireless telecommunication plays a central role in the 21st century American economy, and I’m relieved that we are no longer at risk of concentrating such enormous power in the hands of AT&T and Verizon.