Far from being shocking news, AT&T announced it has decided to give up on its plan to buy T-Mobile USA, Deutsche Telekom’s division in North America. Only a few weeks ago, AT&T faced controversy from U.S. regulators regarding the deal.
Although AT&T has been warned it will not get to end the purchase of T-Mobile successfully, the company decided to withdrawn its filing with the Federal Communications Commission (FCC) to get the deal approved. AT&T wrongly had the impression, U.S. regulators will finally give up, based on the company’s past success in winning approval for mergers and acquisitions.
The company went another way and decided to focus on the antitrust lawsuit initiated against them by the Justice Department, believing that winning it will result in a favorable action from the FCC. The Justice Department sued AT&T and T-Mobile at the end of August, because the authority feels a merger of the two companies would substantially reduce competition. Seven other states, Sprint and C Spire Wireless have also filed private lawsuits to stop the merger.
Lawyers, consumer advocates and market analysts say that AT&T’s failure to buy T-Mobile is a result of the company’s over-enthusiasm and confidence on lobbying and public relations, as well as the underestimation of the government’s involvement and focus on the wireless telecommunications market.
Jeffrey Jacobovitz, antitrust litigator with McCarty, Sweeney and Harkaway PC, explained for Bloomberg what “things went against them”: “First, that the Justice Department would sue; second, that the FCC would move against them; third, that they would get no sympathy from a federal judge”. Finally, says Jacobovitz, “fourth that their efforts to propose a ‘Plan B’ to the Justice Department wouldn’t work either”.
AT&T had officially recognized that the plan to buy T-Mobile was a failure. Now, the company has to pay a pretax charge of $4 billion, a significant break-up fee that could have been avoided.
AT&T’s CEO, Randall Stephenson, did not take the news lightly. He said regulators need to “allow the free markets to works so that additional spectrum is available to meet the immediate needs of the U.S. industry”. He explained that the mobile industry “can be a critical driver in restoring American economic growth and job creation, but only if companies are allowed to react quickly to customer needs and market forces”.