AT&T Agrees to Drop Bid for T-Mobile

AT&T agrees to drop bid for T-MobileLOS ANGELES (AP) - AT&T (T) is bowing out of its $39 billion bid to buy smaller wireless provider T-Mobile USA after the U.S. government tried to block the deal over concerns it would raise prices, reduce innovation and give customers fewer choices.

Monday's announcement came as little surprise after the Justice Department sued to block the merger on Aug. 31. The deal looked further in jeopardy when the Federal Communications Commission's chairman also came out against it. The companies withdrew their FCC application last month.

Bernstein analyst Craig Moffett said the announcement was "a bit of an anticlimax."

"This is like receiving the divorce papers for a couple that's been separated for years," he said.

AT&T's purchase of T-Mobile from Deutsche Telekom of Germany, announced in March, would have made it the largest cellphone company in the U.S. T-Mobile is currently the fourth-largest.

AT&T, the nation's second-largest wireless carrier behind Verizon Wireless , will now have to pay Deutsche Telekom $3 billion in cash as a breakup fee and give it about $1 billion worth of airwaves, known as spectrum, that AT&T doesn't need for the continued rollout of its high-speed "4G" network.

It will also enter into a roaming agreement with Deutsche Telekom so that AT&T's and T-Mobile's customers can use each other's networks.

AT&T will book the $4 billion charge to its earnings in the fourth quarter.

In pulling out, AT&T said the government's attempts to block the deal do not change the challenges of the wireless phone industry, which has been clamoring for more airwaves to expand.

The company said the deal would have solved that problem for a time, and without it, "customers will be harmed and needed investment will be stifled." It called on the government to quickly approve its purchase of unused spectrum from Qualcomm (QCOM) and come up with legislation to meet the nation's long-term needs.

Many people, however, believe that AT&T had overstated the spectrum crisis.

AT&T Inc. 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 network congestion in such cities as New York and San Francisco not by tapping its unused spectrum, but by 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.

AT&T could acquire airwave space through a possible spectrum auction through the FCC or by buying spectrum from satellite cable operator Dish Network Corp. (DISH), which could require an FCC waiver.

The decision to end the bid could be a bigger problem for T-Mobile than for AT&T. Deutsche Telekom has been eager to sell T-Mobile and isn't keen on investing more in the company, which has seen revenue decline slowly with the flight of higher-profit contract customers.

Still, Moffett believes it's too soon to write off T-Mobile, saying it has a good network with lots of room for more customers.

"I think they could surprise some people and be a more important force in the market than people are giving them credit for," he said.

AT&T's stock fell 20 cents to $28.54 in after-hours trading Monday after closing the regular session down 11 cents.


Metz reported from San Francisco.

Increase your money and finance knowledge from home

Small Cap Investing

Learn now to invest in small companies the right way.

View Course »

Managing your Portfolio

Keeping your portfolio and financial life fit!

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

The people who are the losers are the ones that fell for A.T.& T.'s deceptive advertising about how A.T.&T. was going to give them more speed more possibilities if they signed up with them. Survey after survey and interviews with many people who have A.T.&T. always point out the horrible coverage and dropped calls and usually list them at the bottom of the list in quality. This is deceptive advertising in every single definition of the term and I watched them tell lie after lie and paint or cover everything in orange to demonstrate and show their coverage. It is almost like this whole country has evolved in a nation of liars starting with the Obama Administration on down. Doesn't the truth matter any more?

December 20 2011 at 4:23 PM Report abuse rate up rate down Reply

AT&T wants $835.00 early termination fee. I'm glad I wasn't talking to talking T-mobile.

December 20 2011 at 12:31 PM Report abuse rate up rate down Reply

I had terrible service with Verizon. It wouldn't even work inside my home.

December 20 2011 at 11:50 AM Report abuse rate up rate down Reply

Well SBC of Dallas Texas has been putting many pieces from the old Ma Bell back together through the years. The last was buying AT&T to have their name. If you done any research SBC hasn't been on the best companies to work for and now with the new AT&T name and logo it looks like the Deathstar. Now they will have to upgrade their soup can on a string to the 21st century. Oh yes they will cry they are broke when contract time comes around as those in Dallas pack a few more parachutes

December 20 2011 at 11:49 AM Report abuse +1 rate up rate down Reply

The Government didn't block Verizon form taking Alltel. Sounds like the judges and bigwigs are all on Verizon.

December 20 2011 at 11:48 AM Report abuse rate up rate down Reply

T-Mobile need help and it needs help fast. Cusomer service is a Joke. Just try to find someone who isn't reading from a script. I have been with "T" since 2000. Same plan with 3 phones, suddenly I get a $700.00 bill in August. (seems all three of us when over our min., IN THE SAME MONTH!!!). We pay extra for a manged family plan, child can't call after 9 and can only receive calls from family members on "T" which are free.(RIP OFF) We were never notified. Since it's paperless I call for a copy of my bill.....and call and call and call , I was refused to be able to talk to a Manger. Was told some one would call be back, that was last month, still waiting. Will be sending it to the State's Attorney General as soon as I get it
When I finally get "the bill" it's for this month. After looking at this months bill I have found $24.00 in add on's I didn't approve. Now I'm trying to get that taken care of. Again ,same problem , no one who knows what going on. AND PLEASE, fix your voice mail!!! I doesn't understand any one with an accent or speech problem, five min with that to get a real person, most times it doesn't understand southern accent and tell me "GOOD BYE. Good luck if your with this company, make sure you check your bill every month. This could happen to you.

December 20 2011 at 11:43 AM Report abuse rate up rate down Reply

Yeah the government stopped because they were concern about the american public.. anyone really believe that? Hell no... who cares about Att or T mobile...

December 20 2011 at 11:23 AM Report abuse rate up rate down Reply

Hmmm. Smells like Verizon.

December 20 2011 at 11:22 AM Report abuse rate up rate down Reply

These are the same yokels that broke up the phone company years ago and threw us into ridiculously high phone plans for years. Now the major players in wireless are ..the former bell companies. Can't break them up again now, so they will just try to screw them up. Once again out of touch lawmakers to the rescue.

December 20 2011 at 9:36 AM Report abuse +2 rate up rate down Reply

I'd go back to tin cans and string before I'd sign up with AT&T anything, so I'm beyond happy the merger tanked. I'll stick with TMobile as long as my experience with them remains as positive as it has been for the last 8 or so years.

December 20 2011 at 9:21 AM Report abuse -1 rate up rate down Reply
1 reply to canyon2912's comment

They ALL have their deficiencies, T Mobile included, was with them when they were Voicestream, never a problem, they became T Mobile and nothing but problems after the management change. Over billing, unauthorized plan changes, roaming charges in my own home (big house, but not that big!), terrible customer service. just hope it never happens to you.

December 20 2011 at 9:32 AM Report abuse rate up rate down Reply