One of the main factors behind the failure of the deal was the opposition posed by the Obama administration as well as the FCC, with the latter reiterating over and over its concern about a recreation of an AT&T monopoly position. A consolidation between USA’s second and fourth largest telecoms companies would have given the joint entity a subscriber base of 130 million. The size of this behemoth together with market leader Verizon would have amounted over 75% of the entire US telecoms market.
AT&T has been arguing its case for the completion of the deal on the grounds of an added need for spectrum due to the influx of data on its networks as a result of the smart phone revolution, but this factor has seemingly fallen on deaf ears and the company must now look at new ways to acquiring the spectrum it needs to provide adequate services to its customers.
AT&T has to now pay Deutsche Telekom $3 billion in break fees, and hand over additional spectrum worth $1 billion, with Deutsche Telekom now looking for alternatives to exit the US market, which it has clearly shown a desire to leave. The failure of the bid is sure to be a major blow to the seven banks advising on the deal, which were expected to pocket $153 million in fees upon successful completion.
Chief executive Randall Stephenson at AT&T said it was now important to seek alternative ways to improve services and meet spectrum needs. In a statement on Monday afternoon in the US he said: “To meet the needs of our customers, we will continue to invest. However, adding capacity to meet these needs will require policymakers to do two things. First, in the near term, they should allow the free markets to work so that additional spectrum is available to meet the immediate needs of the US wireless industry, including expeditiously approving our acquisition of unused Qualcomm spectrum currently pending before the FCC. Second, policymakers should enact legislation to meet our nation’s longer-term spectrum needs.”
Yesterday’s announcement is welcome news for the country’s third largest provider Sprint, which has also been consistent in its opposition to deal. But this surely isn’t the last of AT&T’s acquisitive options, with Stephenson remaining defiant in his opposition to tough antitrust legislation by the FCC, and militant on the subject of a lack of available of spectrum.
Market watchers have argued that this attempted consolidation had little to do with spectrum, and more to do with establishing top billing in the US telecoms market. AT&T’s next move will tell us more.
