After opposition from the DoJ and the FCC, AT&T finally abandoned plans to acquire Deutsche Telekom’s T-Mobile USA for US$39bn on Monday afternoon US time. AT&T said in a statement that it will recognize a pretax accounting charge of US$4bn in the 4th…
After opposition from the DoJ and the FCC, AT&T finally abandoned plans to acquire Deutsche Telekom’s T-Mobile USA for US$39bn on Monday afternoon US time. AT&T said in a statement that it will recognize a pretax accounting charge of US$4bn in the 4th quarter of 2011, to reflect the break-up considerations due Deutsche Telekom.
The companies will also enter a roaming agreement.
In first reactions to the development media and experts speculated what alternatives remain for the two parties, which both need to solve their need for more spectrum. Indeed, AT&T’s statement focussed on the requirement for more bandwidth, and insisted that the industry is “one of the most fiercely competitive industries in the world”.
“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 said.
The Wall Street Journal pointed out that T-Mobile has no immediate alternative scenarios for the creation of a fast LTE network, but this is seen as essential if it wants to be able to compete with competitors such as Verizon Wireless, and Sprint.
Thomas Wehmeier, an analyst at Informa Telecoms & Media, commented that the substantial US$4bn breakup fee will not make up for the failure of the transaction. “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.”
The FT said that T-Mobile parent Deutsche Telekom would need to come up with an alternative scenario, but a possible IPO of the unit is seen as unlikely, the paper said referring to analysts. A merger with another US operator, namely Sprint, would also be tricky, based on antitrust grounds.
Reuters quoted Deutsche Telekom CEO Rene Obermann acknowledging that more spectrum and network capacity was needed for T-Mobile US, saying “we are working on that,” without giving details.
And for AT&T, reports noted that a possible backup option for the acquisition of spectrum recently fell apart, when spectrum owned by Bright House Networks, Comcast and Time Warner Cable was taken off the market, when Verizon Wireless agreed to pay US$3.6bn for it.
