AT&T, T-Mobile scrap a $39 billion deal
Opposition from the Obama administration over competition and job losses proves too big to overcome. The companies say more capacity to handle growing mobile usage is needed. Sprint is a winner; shares jump.
Updated: 7:59 p.m. ET
AT&T (T) and T-Mobile called off their $39-billion merger late Monday, a move that could cost AT&T $4 billion before taxes in cancellation costs, trim revenues for investment banks by $150 million and give Sprint Nextel (S) another shot at becoming a true player in the mobile market.
The AT&T’s purchase of T-Mobile from Germany's Deutsche Telekom (DT) would have made it the nation's largest cellphone company. AT&T is now the country’s second-largest wireless carrier; T-Mobile is the fourth-largest. But it's not going to happen because critics said the deal was anti-competitive.
Sprint shares jumped 6%, or 13 cents, to $2.29 because investors bet the company would be better able to compete against AT&T and Verizon Wireless, the joint venture of Verizon Communications (VZ) and British telecom giant Vodaphone (VOD).
AT&T was down slightly after hours. Deutsche Telekom was unchanged at $11.43 in New York. Verizon was little changed.
The deal fell apart because of fierce opposition from the Justice Department and the Federal Trade Commission.
Both worried that the deal would reduce the nation's mobile telecommunications market to AT&T and Verizon Wireless and a few bit players to the side. Like Sprint Nextel, CenturyLink (CTL) and a few others.
Article continues below.
And it would mean job cuts for telecom workers in the inevitable consolidation. The Obama Administration said the deal could cost as many as 20,000 jobs, jobs that would take years to replace. T-Mobile has some 42,000 employees.
For their part, AT&T and Telekom said that scuttling the deal means that adding more broadband spectrum will be delayed. The U.S. wireless industry 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 companies said in a joint statement.
They did agree to push a "mutually beneficial roaming agreement."
What started this deal rolling starting in March was AT&T's chronic problem: Not enough capacity in key markets like New York and San Francisco to prevent users from having phone calls, games, even television shows cut off because the local network couldn't handle all the demand.
AT&T could -- and apparently will -- continue to invest in new bandwidth and cell-phone towers. But its solution for a very big short-term fix was to buy T-Mobile from Deutsche Telekom, which was attractive to AT&T for two reasons. T-Mobile uses the same technology that AT&T uses. And the German company wanted to get out of the U.S. market.
The opposition came quickly, from the Obama Administration, labor unions, Sprint and others.
The Justice Department and the FCC said that T-Mobile was an important low-price competitor to Verizon and AT&T. If T-Mobile were to be gobbled up by AT&T, the agencies said, consumers would see higher prices and less innovation.
Monday’s announcement came as little surprise after the Justice Department sued on Aug. 31 to block the merger. The deal's prospects declined when the FCC's chairman also came out against it. The companies withdrew their FCC application last month.
Sanford Bernstein analyst Craig Moffett told The Associated Press that the announcement "is like receiving the divorce papers for a couple that’s been separated for years."
Many people, however, believe that AT&T had overstated the spectrum crisis, the AP said. AT&T already has an ample supply of unused wireless spectrum that it plans to use to expand its network over the next several years.
And much of T-Mobile’s spectrum is already in use, so the deal wouldn’t have resulted in fresh airwaves becoming available. Furthermore, AT&T has made great strides in addressing the network congestion not so much by tapping its unused spectrum, but by simply upgrading its cell-tower equipment.
Moffett said AT&T’s spectrum needs are not so grave that it needs to make a large acquisition right away.
While Sprint was the clear winner, there was some losers: the investment banks that were advising AT&T and T-Mobile on the deal, The Wall Street Journal noted this afternoon. (Registration may be required.) They stood to collection $150 million or so in fees.
And one other company will be a winner, The Journal said: Goldman Sachs (GS). Because JPMorgan apparently won't get to claim the deal, Goldman will end the year as the top investment bank in mergers and acquisitions.
Well as long as the investment banks are losing out, I guess its not a total loss.
If T Mobile wants out of the U.S. market, I think it is shameful for the government to interfere. Let T Mobile go out of business altogether and and see who loses? Still less choice, less jobs etc...might as well have let them be bought by AT&T.
T-Mobile's been just horrible for me. They added 3rd party charges from scammers onto my bill. T-Mobile conveniently labeled them "other charges" so I wouldn't know what they were for. I paid them for a while and when I discovered the error T-Mobile refused to issue me a full refund. I cancelled my account and am much happier with my new provider.
T-Mobile is the only one of the big 4 cell companies that is not American owned. Leave it to the Obama administration to block the purchase of a German owned co. by an American owned co. Only AT&T and T-Mobile with their GSM technology work internationally. The CDMA technology used by Verizon and Sprint is only used in North America. Imagine being a business person who travels internationally and having an iPhone that can only be used in North America. I was an AT&T customer since 1999. I switched to T-Mobile when I stepped up to a smartphone because they by far have the best rate plans. Sprint's ads are so misleading they should be criminal. They say they're truly unlimited.
For data and mobile to mobile calls, but their $79.99 plan only gives you 450 minutes of calls to landlines. To have truly unlimited calling, text & data with Sprint is $99.99, the same as both AT&T and Verizon. How this helps Sprint is beyond me, they're by far the worst, I had them before AT&T. And their ads saying that T-Mobile slows your speed to 2G after
2 GB of usage is true, but only on the $79.99 plan. The advantage is that you NEVER pay overage charges. You need more 4G, then the 5 GB plan is only 10 bucks more, $89.99, still less then Sprint. You can even get 10 GB/month if you need it and all 3 plans are unlimited data. My bill is the identical price every month. If you buy your own phone you can even get the same rates at $20.00/month less. 60 bucks a month instead of $79.99 and there's no contract. If T-Mobile
closes up shop, how does that help me? I'd be grandfathered in on the rate plan that I have if AT&T bought T-Mobile.
Don't know how they stay in business, I am sure I am not the only one who has misplaced their phone and didn't report it right away and then got screwed with some bs international phone call. If you get a phone from them Tell them immediately that you don't want international phone calls to be made from your phone so you won't get double screwed from it. They won't help you at all. Matter of fact they will want you to pay more a month for your international phone call that you won't make. they don't tell you stuff like that. You would think they would block that feature and Make it where you have to turn it on so you don't get screwed. But no they want to. Screw you that is.
Why? Because Americans need to understand that U.S. economy is precariously balanced on the edge of full-blown collapse.
you do realize this is a leftwing liberal site and such comments are ignored and never understood!
1. I don't live near woods. Live right next to the beach and million dollar homes. Signal was great. Just thought I misplaced my phone at home and not in front of a redbox. Never made an international phone call in 8 years of service and lose my phone for three days and go to buy another anf get hit with a bill for a call you obvislouy didn't make. Who pays over 200.00 for a phone bill is an idiot just saying. Why would you need 5 lines for? Kids? Ever heard of the magic jack!
i had to share this; then ask yourselves........................."W-T-F"; seriously!! watch the video, caution: it will make you sick! is the W.H. punking DOD or is the DOD punking the W.H. on this; a few month's prior to 9/11 the "TALIBAN" visited the U.S. and the state of texas just to see for themselves of how the infidels live...G.W. was governor!
Jake Tapper forces Jay Carney to answer for Biden's remark that the Taliban is not our enemy. Carney concludes that the statements are only regrettable "if taken out of context."
Dateline: Washington, D. C.
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
[BRIEFING.COM] Stocks entered the weekend on a mixed note as the S&P 500 shed 0.1% while the Dow ended with a gain of 0.1%.
The major averages began the day on a lower note as nine of ten sectors saw losses of more than 0.5%.
The consumer staples sector was the lone exception as the group spent the entire day in positive territory thanks to the relative strength of Dow component Procter & Gamble (PG 81.89, +3.19). The second-largest staple stock advanced ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
LATEST MARKET DISPATCHES
- No more Dispatches; here's where to find market news
The Market Dispatches column has been discontinued. Here's where to find the latest stock and business news on MSN Money, and the latest from market writer Charley Blaine.
- Dow falls 59 as late-day gloom kills a rally
- Stocks held back by fiscal-cliff worries
- Stocks suffer worst weekly loss in 5 months
- Dow off 121 as post-election swoon continues
- Dow slumps 313 after Obama's re-election
- Dow jumps 133 as Americans head to the polls
Try as the bears might, they couldn't break U.S. stocks. But investors still face frothy prices and considerable headwinds.