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

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While T-Mobile was dealing with its woes in the US wireless phone industry, AT&T was often criticized for the slowness of its network despite its being one of the major players in the US wireless phone industry. Hence AT&T decided to improve its service and network quality with the acquisition of T-Mobile and its wireless spectrum. The move was also crucial for helping the carrier ramp up its rivalry with Verizon, according to AT&T. On the other hand, T-Mobile decided to use AT&T’s spectrum and network assets to cater to 4G customers in the US. Thus in March 2011, AT&T announced its US$ 39 billion cash and stock deal with T-Mobile.4

The merger between the second largest wireless carrier in the US, AT&T, with the fourth largest, T-Mobile, was expected to create the largest wireless carrier in the US, according to experts.

Soon after the deal was announced, it came in for a lot of flak from the DoJ, other wireless carriers, the FCC, and several consumer groups. The DoJ and Sprint said that the merger would restrict competition and increase prices for mobile phone users in the US. According to FCC officials, AT&T's confidential filings revealed that the merger would eliminate jobs in the US. The US regulators also questioned the effects the deal would have on the competitors and consumers. Interests groups such as Public Knowledge stated that the merger would cause "higher prices, fewer choices, [and] less innovation." Some groups felt that the industry would get consolidated, resulting in reduction in competition and job losses. However, AT&T and T-Mobile jointly denied that the deal would lessen competition. They said that it would, in fact, create jobs in the US. Both the companies also filed an application with the FCC requesting it to permit them to go ahead with the merger. AT&T and T-Mobile also lobbied the US regulators by getting support from several lobbying groups such as Alliance for Digital Equality, the Hispanic Federation, and the National Black Chamber of Commerce. Despite several attempts by AT&T and T-Mobile to carry on with the deal, the FCC announced that AT&T would have to withdraw the merger. Hence, in December 2011, AT&T announced that it had called off its merger with T-Mobile and would pay T-Mobile a break fee of US$ 4 billion following its withdrawal of the deal. Analysts were keen to see what the ramifications of the failed deal would be for AT&T, T-Mobile, and the industry as a whole.

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4] David Goldman, "AT&T Kills $39 Billion Bid for T-Mobile," http://money.cnn.com, December 19, 2011.

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