It’s safe to say that AT&T CEO Randall Stephenson has had a pretty awful couple of weeks.
When AT&T announced its blockbuster acquisition of T-Mobile, it seemed as if a fundamental shift in the wireless market was inevitable. Even with opposition from Sprint, many assumed AT&T’s strategic planning and lobbying dollars would win it approval for the $39 billion deal.
All of AT&T’s plans are out the window now, though.
Late last month, in a surprisingly swift move, the U.S. Department of Justice moved to block the deal. The DoJ filed a civil antitrust lawsuit backed by the FCC, drastically reducing the chances that the wireless giant could complete the merger.
AT&T and Deutsche Telekom (parent company of T-Mobile USA) quickly moved to downplay the decision, claiming that they were “confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court.”
Since then, two more parties have gotten involved on each side of the debate. On one side, 15 Democratic members of the House of Representatives sent a letter to President Obama urging his administration to resolve its concerns about the deal and “approve the proposed merger between AT&T and T-Mobile USA.”
On the other side, seven states this week joined the Department of Justice lawsuit. California, Illinois, Ohio, New York, Massachusetts, Pennsylvania and Washington are now parties to the case. Their entry doesn’t bode well for AT&T.
At this point, there are four potential outcomes for this case:
1. DoJ wins its case and blocks the AT&T merger.
2. AT&T wins its case and the merger moves forward.
3. AT&T withdraws its acquisition before a decision is rendered.
4. AT&T and the DoJ settle the case, and the merger moves forward with conditions.
Of the four, #2 is the most unlikely. The DoJ doesn’t like picking antitrust fights it cannot win, and AT&T would definitely have to find creative ways to convince a judge that a T-Mobile acquisition wouldn’t hurt competition. Outcome #1 is also unlikely — we believe that AT&T would withdraw its acquisition before suffering an embarrassing defeat in court.
That leaves either a settlement or a withdrawal of its acquisition. It’s clear at this point that AT&T is hoping to find some way to settle with the DoJ to get the deal done. “We have been and remain interested in a solution that addresses the DOJ’s issues with the T-Mobile merger,” AT&T said in a statement when the news broke of the seven states joining the DoJ’s case.
In the end, this could all be posturing by the DoJ to get concessions out of AT&T before approving the deal. More likely though, this is the DoJ putting its foot down on a deal that many (including me) believe to be bad for consumers.
AT&T’s arguments that the deal will not hurt competition sounds like convoluted drivel from desperate spin doctors. One of the company’s big arguments — that the merger would bring 4G LTE coverage to rural areas faster — was quickly destroyed after a leaked letter revealed AT&T could make the same 4G LTE upgrades for $3.8 billion, a fraction of the cost of T-Mobile.
The bottom line is this: The merger is anti-competitive no matter how you slice it, and there was no way the DoJ could let this deal pass.
It’s not the outcome Randall Stephenson was hoping for. AT&T is going to experience a lot more pain before the outcome of this case is finally decided.
Via Mashable: http://www.mashable.com