AT&T abandons $39bn acquisition of T-Mobile USA

Nine-month long bid comes to halt forcing AT&T to look elsewhere for the extra spectrum it was seeking

AT&T abandons $39bn acquisition of T-Mobile USA

US telecom giant AT&T has abandoned its attempt to acquire its smaller rival T-Mobile USA. AT&T said that after a thorough review of options it has agreed with T-Mobile USA’s parent company Deutsche Telekom to end its bid to acquire the subsidiary, which began in March 2011.

The bid ran into heavy opposition from the Federal Communications Commission (FCC) and the US Department of Justice. In August, the latter sued AT&T in an attempt to block the acquisition on anti-trust grounds.

However, in a statement issued on 19 December, AT&T said the actions by the FCC and the Department of Justice to block the transaction do not change the realities of the U.S. wireless industry.

AT&T argued that the mobile telecommunications market 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 recognise a pretax accounting charge of $4 billion in the fourth quarter of 2011.  Additionally, AT&T will enter a mutually beneficial roaming agreement with Deutsche Telekom.

Thomas Wehmeier, principal analyst (Telco Strategy) at Informa Telecoms & Media commented: ‘There are very few occasions when you are forced to walk away from the table with $4 billion in your pocket and still feel like you've just been short-changed - that's what the collapse of the sale of T-Mobile USA will feel like to Deutsche Telekom. Having frequently -and very publicly- reiterated the absence of a Plan B, the break-up fee will be small consolation as it is forced to carve out a third path, or Plan C.

‘Deutsche Telekom CEO Rene Obermann had looked like a magician when pulling off the proposed $39 billion deal of the decade in March, but not even he had enough tricks up his sleeve to convince the US regulatory authorities to allow what would have been a sector-defining deal to pass.’

Wehmeier continued: ‘In the short term, the management will have to focus on how to shore up its stuttering US business, but a longer-term strategy must be carved out as quickly as possible. The subsidiary, which contributes a sizeable percentage of group revenue and EBITDA, has been in limbo for nearly a year now. Investors will undoubtedly be seeking  swift clarification of its revised strategy and evidence that DT can press ahead with meeting its 2012 targets.

‘The news also has wider implications for the sector. Much has been made of the need for in-market consolidation within the intensely competitive mobile industry, but having to potentially navigate around seemingly insurmountable regulatory hurdles is likely to shake the confidence of would-be consolidators to the core,’ concluded Wehmeier.

Written by Wireless magazine
Wireless magazine

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