Time to Stick a Fork in AT&T/T-Mobile

September 19th, 2011 by · 6 Comments

Yes, I know that AT&T could still win in court, or that they could find some magic formula of divestments that would let them eek their way through. But in practical terms, I think we may have passed over the hump of reasonability. Winning this battle may come at too high a cost, whether it be in changes to the deal, bridges burned along the way, or more importantly time lost that could have been spent implementing another strategy.

Opposition to the merger of AT&T and T-Mobile has been finding more and more public support. Late last week seven states joined the federal governmant’s suit to halt the deal on competitive grounds: New York, California, Illinois, Massachussetts, Ohio, Pennsylvania, and Washington. AT&T says it’s not worried, but what else are they going to say? The seven states piling on is a rather more substantial blow than they landed the day before with the letter to Obama from a group of Democrats led by North Carolina’s Heath Shuler.

In fact, other reports over the weekend have AT&T in talks with smaller competitors like MetroPCS, LEAP, and yes even Sprint regarding asset sales that would make the deal more palatable. Those other carriers a) have little reason to want to help AT&T become more dominant (quite the opposite) b) lack the resources in most cases to make big moves right now, and c) have other problems right now competitively that there are better inorganic solutions for. Hence, any help AT&T gets on that front is not likely to come at a favorable price, and hence will lessen the attractiveness of the original deal.

Even if they do put together a divestment package that materially changes the status quo, it seems unlikely that the DOJ would back off.  They don’t seem interested in improving the deal, they want to stop it.  Beating the government in court is possible, but there are other costs to that strategy than mere substantial legal fees.

The AT&T lobbying machine is running out of thumbs to stick in the dike. We’re moving into a political season in which polarization will make it hard for them to put together a compromise.  The union support it has depended on has not supplied enough political cover on the left, and while the right may be on their side they don’t actually care that much it seems. To put it another way, supporters of the deal aren’t looking very motivated, while critics seem increasingly so.

So I think it’s over in a practical sense, though I don’t think AT&T can yet back down honorably. They’ll keep fighting for a while yet, but I think that unless they make a lot of progress over the winter then this proposed deal won’t make it past its first birthday.

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Categories: Mergers and Acquisitions · Wireless

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6 Comments So Far

  • Carlk says:

    Ah, Mr. Powell, you are turning into an optimist right before my very eyes, believing that the authorities who have dominion over both of us, will not be bought nor compromised by the powerful lobby groups who are emboldened by age old monopolies that have served their citizens no damn good!

    I hope you are right, and the sooner I see those same authorities blessing a much newer entrant’s merger designed to add indescribable values to domestic and global citizens alike, while opening up the communication bottlenecks, and at the same time freeing them from the tyranny of controlled, bottled messages, I will add towards your leap of faith.

    That’s quite a price being estimated at $6-7B in cash and other tangible values which TREX, the dinosaur, has exposed its owners to losing. They must really believe they “own” the regulatory bodies on their home turf!

  • Anon says:

    I love this story. What’s a DOJ lawsuit, including seven states (NY, CA, and the other ones), a civil antitrust lawsuit from the company that used to be sprint and some mad consumers when you have the state carriers of USA and Germany behind a plan. Even VZ isnt complaining (they think like T).

    I think that ATT is larger department of the US Government than DOJ anyway. Plus has more lawyers. Maybe DOJ will make ATT take off their shoes more often or will call over to FTC and make them stop calling limited data plans “unlimited” but actually block a merger?? That requires a judge, and then an appeal, and then en banc, then the supremes… If ATT was scared by this “legal stuff”, CLEC’s would actually be profitable??

    ATT (if even to avoid break up fee) can buy alot of (former DOJ) lawyers with $6B… Hold on — perhaps they will wait for the next DOJ (post election) and then re-spin the dial ?

  • Carlk says:

    Maybe the U.S. Govt. should call Mother England with the Queen on the other end of the dial tone, and have the oldest telecom company around the globe, British Telecom, weigh in on this quagmire? What do you think Anon?

  • anon says:

    merge them in too

  • Carlk says:

    Who would have thunk it, except for an old telecom guru and the prior CEO of American Fiber Systems(AFS) who used to appear on this board, and maybe still does? Make the lawyers richer is so American, and use the ones who were cultivated from within including all the important contacts necessary to make shambles of basic common sense!


  • Carlk says:

    It seems to me that, The DOJ and FCC would be wise to show their care and concern for citizen welfare in the approval of beneficial “communication” company mergers also on their desks; ones which are certain to create POSITIVE competitive landscapes by moving quickly to approve another merger in their midst. This will send a simultaneous MESSAGE to their PUBLIC that they know what the hell they’re doing!

    Additionally, this will assist them in gaining better PUBLIC MIND SHARE during the process of placing the screws to that GIANT MONOPOLY(s) of yesteryear who have failed miserably for decades in providing citizens with sufficient innovation that is crucial for advancing their society by way of the internet.

    Get that (3)/Global Crossing paperwork off of your desks already! Don’t be shy. Just do it!

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