AT&T's Failed Acquisition of T-Mobile USA

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"Things would have looked pretty bleak in the U.S. wireless industry if AT&T/T-Mobile had gone through. It’s taken a worry off not only us, but others."

-Dan Hesse, CEO, Sprint Nextel , in February 2012.

"The DoJ's recent actions increase Washington's influence on the fate of the industry and could force carriers to reassess and/or delay 4G strategies...In short, the DoJ lawsuit introduces a great deal of uncertainty into the telecom sector: uncertainty for AT&T and T-Mobile, uncertainty for their competitors who may reassess their strategies, and of course uncertainty for investors." ¹

-A Morgan Stanley report commenting on Department of Justice's attempt at blocking the AT&T and T-Mobile merger, in September 2011.

On December 19, 2011, Randall Stephenson (Stephenson), CEO of US-based telecommunications major, AT&T Inc. (AT&T) announced that the company had officially withdrawn its bid with T-Mobile USA Inc. (T-Mobile), a subsidiary of German telecom major, Deutsche Telekom AG (Deutsche Telekom), amidst heavy resistance from several levels of the US government and the US Congress . The deal, since its announcement in March 2011, had attracted opposition from several quarters. In August 2011, the Department of Justice (DoJ) first filed a suit to block the merger, terming the deal as anti-competitive.

This was followed by lawsuits by other major wireless carriers such as Sprint Nextel (Sprint) and Cellular South Inc. who feared that the deal would create a duopoly in the US wireless phone market dominated by AT&T and Verizon Wireless (Verizon). Subsequently, a report by the Federal Communications Commission (FCC) in November 2011 revealed that the deal would limit competition in every city in the US and lead to higher prices for consumers. The mounting pressure led to AT&T calling off the deal with T-Mobile in December 2011.

AT&T was the second largest provider of fixed telephony and mobile telephony in the US, as of FY ended 2011. For the third quarter ended September 30, 2011, AT&T catered to 100.7 million subscribers in the US.²

T-Mobile was founded in 1994 as VoiceStream Wireless PCS in the US. It was the fourth largest wireless carrier in the US with 33.7 million customers for the third quarter ended September 30, 2011.³ In its initial years, T-Mobile's growth was attributed to its post pay customers. Moreover, its wireless service quality and customer service helped the company emerge as one of the most promising players in the US wireless carrier industry. However, after the introduction of the iPhone in 2007, T-Mobile started losing customers to arch-rivals AT&T and Verizon who served iPhone customers. Over the years, the loss of subscribers translated into declining sales for the company. The company also struggled to add new customers while carriers such as AT&T, Verizon, and Sprint attracted new mobile phone shoppers with smartphones. These players also had faster networks and data services. To fix its problems, T-Mobile's parent company Deutsche Telekom decided to spin off the company or raise an initial public offering...

Introduction Contd... - Next Page>>

1] "Blocking the AT&T / T-Mobile Merger will Harm Consumers, Communities & the Economy," http://files.cwa-union.org, September 2011.
2] Christopher Brook, "Failed AT&T Hack Attempt Targeted One Million Customers," http://threatpost.com, November 22, 2011.
3] "AT&T Deal is Dead, Long Live T-Mobile USA," http://blogs.strategyanalytics.com, December 29, 2011.

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