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.

By Charley Blaine Dec 19, 2011 8:20PM

© Frank Augstein/AP; Lisa Poole/APUpdated: 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.


Article continues below.

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.

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.


These include Greenhill & Co. (GHL), JPMorgan Chase (JPM), Evercore Partners, (EVR), Morgan Stanley (MS), Deutsche Bank (DB), Credit Suisse (CS) and Citigroup (C).


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.

18Comments
Dec 20, 2011 2:25AM
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THANK GOD....... I don't know what people are complaining about. I will be the first to say T-Mobile is better in cities than out in the woods. That being said I have 5 Lines with T-Mobile. Unlimited Everything (after 2GB your dropped from 4G to 3G) For 204.99 a month plus tax. I challenge anybody on them prices. I went to Verizon and At&t and i couldn't get 2 lines from them with the same features. Much less 5. This is a BIG WIN for the CONSUMER. Somebody earlier complained about international calling on T-Mobile. Well we all heard the story about a year ago with the $25,000 At&t bill. A US soldier was overseas and was told he could add a feature to his phone to call back to America. Well his wife had there baby and they talked all month and received a $25,000 bill. At&t said he misunderstood and wouldn't budge on the bill. Either a US Senator or Congressman from his home state asked At&t why they let the bill get so high. He said they should have called or cut off service when a bill gets over a certain limit. No At&t MILKED HIM. At&t wouldn't even budge for him. With that being said you have horror stories with all Carriers. So don't single out T-Mobile on that. Bottom line for a consumer. If you get a good T-Mobile signal where you live.... You can't beat T-Mobile's price. If you don't get a good signal.... go take out a second mortgage cause you going to pay big time for At&t or Verizon service.
Dec 19, 2011 8:50PM
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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.

Dec 20, 2011 2:15AM
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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. 

Dec 19, 2011 10:00PM
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What happened today? Well, no different than most days this last couple of months...A little after 1500 hrs we knew we were doomed, that's why we called it;  these manipulators called to do their thing and with this low volume a 40 point loss became a 100 point one and of course, it could have been worse. Its so easy for these scumbags to blame it on anything and anyone except themselves because they are cheating and stealing, which is not legal except for Wall Street  of course because, nobody is watching, as simple as that. This year so far these dirt bags have stolen almost as much as they did in 2008, almost. We are always asked, why don't you do something about it, why not get the SEC involved, like we've said many times before, the SEC is worthless and opts to do nothing, remember Madoff? The reality is that many of these SEC inepts will end up here on the floor and/or working for some big brokerage firm so, you understand.
Dec 20, 2011 9:48AM
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At least we can continue to see the cute T-Mobile gal in the pink dress!
Dec 20, 2011 2:03AM
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Somehow, me and Dale have fallen in love with our T-Mobile system.  We have been on Sprint, AT&T and Cox, but T-Mobile was always true with what they said they were giving!!  So, nice that the giant is not allowed to swallow up other groups!
Dec 20, 2011 1:48AM
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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.

Dec 20, 2011 2:33AM
Dec 20, 2011 1:52AM
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T-mobile sucks.REALLY SUCKS!!!!! You can vote this down all you want charma is b.
Dec 20, 2011 2:52AM
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Who pays over $200 for a phone bill? At&t and Verizon customers if they have multiple smart phones. Yes we've all heard of Magic Jack with the infomercials. Have you ever talked to somebody who used it? If so i bet they don't use it anymore. You can't get a signal 70% of the time. Who has 5 lines? A small business. Bottom line I've had 3rd party charges waived countless times. I upgraded one time and got a 600 charge on my Iphone. I called and T-Mobile corrected it. Like I said your going to have a million horror stories with all carriers when it comes to bills. If YOU MISPLACED your phone you are RESPONSIBLE for it... It's sad but don't pass the buck.
Dec 20, 2011 10:41AM
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Another day with decent news and finally the market reacting accordingly, we are doing good down here, so far. Please never forget,  no lead is safe down here if and when manipulators take over, 100, 200, 300 points, does not matter...We are off to a good start today, see if we can maintain it...More later.
Dec 20, 2011 1:41AM
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Really hope t-mobile does go out of business. They Suck. I had a contract for 8 years. I paid it on time always. Never came close to going over my minutes, never had any spam until. I lost my phone in front of a redbox. Didn't know it at the time and assumed it was in the couch or under a seat in my van. Not really worried about it until a few days had past so I went into town which is about a 30 min drive hence why I put it off (going and getting another phone) a couple days. Well I get in the store and I'm about to get a new phone and pay my bill and they tell me I owe them $140.00 for an international phone call to B. F. E. (Hundoras or something) for a 40 min or so conversation. That I didn't even have. I told them I had lost my phone a couple days earlier and because I rarely go out besides to work. (even then I leave my phone in my car) that I thought it might be at home somewhere. I also didn't have a smart phone just a cheapie with an adroid plan that I was still paying $90.00 a month for with a cheapie phone. Anyways I asked them as a valued customer to look into my account and see I have never made an international phone call ever and to also notice that I hadn't called the surf report in a couple days because I do everyday. They told me that the only thing they could do was offer me a 5.00 a month add-on to my plan. To have lower international phone calls. I was furious. So mad I couldn't believe it. Pay them for web time I didn't (couldn't) use, Paid on time every month, never used near all of my minutes and they couldn't (wouldn't) do anything. As big as t-mobile is you would think they could eat the $140.00 off to theft especially when it's obvious to keep a customer A good one at that. Eff t-mobile. I hope they do plummet. I hope everyone reads this and either does one of two things, 1 drop them, 2 call them and block international phone calls on your phone in the event you do lose it somewhere you can't be scammed to after losing your phone and having to buy another you don't want to pay for someone's bs phonecalls. After I paid the two hundred dollar cancelation fee and my last month with them in advance of course They started sending me spam messages, that I have never had recieved before I dropped them. Three days in, enough (to piss you off) where they were intentionally wasting my minutes that I had already paid for and had like 25 days left with the service. I called the customer service and after pitching a pretty big fit the manager somehow stopped them Just like somehow they magically started. So don't go with t-mobile they are SCUMBAGS. I would like to kick their ceo in the Place we won't mention. If I wasn't busy I would stand in front of thier store protesting those bas$%^&s. Don't really understand how when I'm the one who got screwed by them I get voted down, Wait till it happens to you. Customer service should never be overlooked for another dollar. Good customer service will bring you enough dollars.
Dec 20, 2011 2:43AM
Dec 20, 2011 1:49AM
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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.

Dec 20, 2011 2:18AM
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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!Nerd

Dec 20, 2011 2:35AM
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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!

Dec 20, 2011 1:53AM
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Well that's brilliant. T Mobile was going under. How many more layoffs is this refusal going to cause?
Dec 19, 2011 10:48PM
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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."

December 19, 2011 at 1:37 pm - WH.gov
Dateline: Washington, D. C.
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