It's over. AT&T has thrown in the towel, knuckled under, cried uncle, retired from the field, raised the white flag. Whatever you call it, they have officially given up their attempt to purchase T-Mobile USA and agreed to pay the breakup fee of $4B in cash, spectrum, and roaming rights. The combined weight of the opposition of the DOJ and FCC had made it all but impossible to continue, though I'm still somewhat surprised that the company didn't even take the rest of the 30 day time-out the judge allowed them to mull over their options.
It's quite an amazing result, really. Last spring the general consensus was that the deal was obviously anti-competitive but that the lobbying power of AT&T would prevail - throwing in a few divestments along the way to smooth the way forward if needed. They put together a vast alliance of supporters, some who just liked the deal, and some which had something to gain - like the unions who saw a quick way to swell their membership rolls - and some which were simply beholden to AT&T cash in some form and sent in a letter when asked. And they submitted reports and studies claiming that the deal would result in job creation even as they promised synergies to shareholders, and that competition would flourish as it diminished. Yet in the end, no amount of lipstick could hide the sheer size of the pig underneath.
The question now splits into two:
- Where will AT&T turn to get the spectrum it says it needs to compete in a 4G world? Verizon has been gobbling up spectrum while AT&T has been busy, buying out the AWS holdings of the cable companies. While AT&T's purchase of Qualcomm's spectrum will likely now be approved they will surely be looking for more. Maybe they could put LightSquared out of its misery and try to repurpose that spectrum, since they would have more time to definitively solve the GPS problem and perhaps the lobbying power to match the GPS industry's objections and force a compromise.
- What will Deutsche Telecom AG (ETR:DTE, news, filings) do now? They moved to sell because they lacked scale and weren't willing or able to invest the money it would take to get there. Now they re-emerge 9 months later with the same proble, but with the breakup fee in hand. Will they use it to rejuvenate T-MobileUSA? Could they possibly now turn to Sprint/Clearwire to partner for that LTE buildout and save their own spectrum for HSPA+?