AT&T throws in the towel on T-Mobile merger

 

AT&T has thrown in the towel on its controversial bid to buy T-Mobile USA from Deutsche Telecom (DT).

Since it was announced in March, the £39bn acquisition drew fierce criticism from US consumer groups, not to mention stiff resistance from the US Justice Department and the Federal Communications Commission (FCC).

The termination of the merger incurs a hefty payout from AT&T, $3bn to DT in Q4 this year. In addition, AT&T will provide a significant package of mobile communications spectrum and a long-term roaming agreement within the U.S. which Deutsche Telekom said will improve T-Mobile’s coverage to 280m potential customers from 230m.

Many wondered how long AT&T would chase the deal for following a series of stinging attacks that began, pretty much as soon as it was announced in March. The marriage, creating the country’s largest wireless service, would generate increased infrastructure investment, benefiting high speed network coverage, said both companies, and create new jobs around the country. By blocking the deal, “customers will be harmed and needed investment will be stifled”, said AT&T.  

However, in August the Justice Department moved to block the merger by suing AT&T, claiming that, in fact, the merger would result in higher prices for customers, fewer choices and lower quality products for wireless services.

In a further setback in November, the FCC published a scathing report, stating that the deal was not in the public interest, would harm competition and result in massive layoffs.

“Both companies are in agreement that the broad opposition by the U.S. Department of Justice and the U.S. telecommunications regulator (FCC) is making it increasingly unlikely that the transaction will close,” said DT in a statement yesterday, adding that they felt important arguments in favour of the deal and offers of concessions by both companies had been ignored.

It is unclear what will happen to T-Mobile now; over the first nine months of 2011, it dropped almost three quarters of a million contract customers.

The $3bn AT&T breakup package is expected to cover the running and capital expenditure costs of T-Mobile for maybe two years, providing scant breathing room for DT, which has more or less ruled out further investment in the US wireless industry.

DT Chief Executive Rene Obermann told journalists that work was already under way on a on a long term plan for T-Mobile, though gave little away as to what that plan might entail.

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