19
Dec
death-star-att

It's official: AT&T-Mobile will not be happening any time soon. AT&T, the US's second-largest wireless carrier and all-around communications mega-corporation, after months of attempting to convince consumers and federal agencies alike that the deal was going to be good for everyone, has given up its plans to purchase T-Mobile, a division of Deutsche Telekom.

As part of the cancellation, AT&T will pay DT a $4 billion accounting fee to get out of its contract, as well as expand roaming agreements with the company (where, when, and for what purpose was not stated).

One worrisome issue that comes to mind for me is the damage done to T-Mobile's reputation in all of this. T-Mobile already has notoriously bad customer churn (the company itself admits that the lack of an iPhone is cause for concern in this area), and this is the first time Google hasn't selected the underdog carrier as its go-to for debuting a Nexus handset. Worse yet, T-Mobile is the furthest behind of any carrier in deploying true next-generation 4G technology, with no concrete plans announced for any such investment. The company currently operates a HSPA+ "4G" network, though that technology has significant limitations in terms of signal strength, penetration, and end-user scalability when compared to LTE.

AT&T is beginning a steady expansion of its own LTE network, which T-Mobile presumably would have benefitted from in the form of shared use, while also giving AT&T access to T-Mobile's chunk of LTE-compatible spectrum.

While many consumer advocates bemoaned the deal as yet another example of Ma Bell trying to monopolize the telecom industry, AT&T continues to claim that the merger would have helped solved the "spectrum crunch" facing carriers looking to effectively deploy 4G mobile broadband in the US. The merits of that claim have been picked apart by many, and the "spectrum crunch" has been seen as little more than a talking point for AT&T's pleas to the FCC.

But it's pretty clear that T-Mobile doesn't have a lot going for it right now - with no next-generation 4G plan announced, no iPhone, no Nexus, and the smallest subscriber base of the US's "big four," it's hard to find bright sides to this collapsed deal. Subscribers may cheer at the failed financial incursion of the oft-demonized AT&T, but I think it's safe to say T-Mobile's boardroom isn't exactly the happiest place on earth right now.

Update: Sprint released the following statement in response (shocking, I know!):

"Earlier today, AT&T terminated its definitive merger agreement with Deutsche Telekom to acquire T-Mobile USA. This is the right decision for consumers, competition and innovation in the wireless industry.

From the beginning, Sprint has stood with consumers who spoke loudly and clearly that AT&T’s proposed takeover of T-Mobile would create an undeniable duopoly that would have resulted in higher prices, less innovation and fewer choices for the American consumer.

Sprint commends the Department of Justice, the Federal Communications Commission and the bi-partisan group of state attorneys general who gave voice to the concerns of consumers across the country. We look forward to competing fiercely in the robust, competitive market that exists today and continuing to deliver the world class service and products that consumers have come to expect from Sprint."

Here's the full release:

AT&T Ends Bid to Add Network Capacity Through T-Mobile USA Purchase

Company Reaffirms Its Commitment to Mobile Broadband Leadership

DALLAS, Dec 19, 2011 (BUSINESS WIRE) — AT&T Inc. said today that after a thorough review of options it has agreed with Deutsche Telekom AG to end its bid to acquire T-Mobile USA, which began in March of this year.

The actions by the Federal Communications Commission and the Department of Justice to block this transaction do not change the realities of the U.S. wireless industry. It is one of the most fiercely competitive industries in the world, with a mounting need for more spectrum that has not diminished and must be addressed immediately. The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage. In the absence of such steps, customers will be harmed and needed investment will be stifled.

“AT&T will continue to be aggressive in leading the mobile Internet revolution,” said Randall Stephenson, AT&T chairman and CEO. “Over the past four years we have invested more in our networks than any other U.S. company. As a result, today we deliver best-in-class mobile broadband speeds — connecting smartphones, tablets and emerging devices at a record pace — and we are well under way with our nationwide 4G LTE deployment.

“To meet the needs of our customers, we will continue to invest,” Stephenson said. “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 U.S. 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.

“The mobile Internet is a dynamic industry that 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,” Stephenson said.

To reflect the break-up considerations due Deutsche Telekom, AT&T will recognize a pretax accounting charge of $4 billion in the 4th quarter of 2011. Additionally, AT&T will enter a mutually beneficial roaming agreement with Deutsche Telekom.

*AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc.

BGR

David Ruddock
David's phone is whatever is currently sitting on his desk. He is an avid writer, and enjoys playing devil's advocate in editorials, and reviewing the latest phones and gadgets. He also doesn't usually write such boring sentences.

  • http://www.teamrou.com Phil Oakley

    Google, buy T-Mobile and put them out of their misery.

    • http://michael.bearfootden.com Michael?!

      I agree with the above comment.

    • hldc1

      Not going to happen. Pretty sure a company is not allowed to produce software (Android) on phones they manufacture (Motorola) and also own their own wireless cellular network (G-Mobile). That's pretty much why Apple/Jobs wanted (although the idea died pretty quickly) to create a nationwide Wi-Fi network for iPhones so they could circumvent that restriction.

      • Freak4Dell

        I don't think there's anything in the law books that say they can't (feel free to provide a link if there is), and since Android is open source, they're not hindering anyone else from using Android just because they own a carrier.

        In fact, it would increase competition on the hardware front, because if Google chose to use Motorola for most of the phones on this Google-owned network, the other carriers would start working harder to make their phones better (and possibly release updates faster), and the carriers would have no choice but to push the manufacturers to start making better devices.

    • J-Dog

      I wouldn't mind seeing that happen either. I'd really love it if, after buying T-Mobile, they were able to magically get their network penetration up to the level of Verizon's (and preferably beyond) and picked up a ~$20/month unlimited plan - unlimited talk, text, and data.... And, of course, used the OED definition of unlimited... Not the current definition of "as much as you want, up to 5GBs".

      If both criteria were met, I'd switch in a heart beat - even faster if they could get Nexus'erized versions of all the various manufacturer's flagship phones...

      • Freak4Dell

        I'm not sure that the $20/month level is reasonable from a profitability standpoint. You'd have to make a major quality sacrifice to get that low. Honestly, T-Mobile's Value plan rates are pretty reasonable right now, so if they were able to keep that pricing or drop it slightly, while at the same time expanding service and making every aspect of the company better, then it would easily win over customers.

        Then again, Google doesn't try to make any serious money from any of their non-advertising ventures, so maybe they would be crazy enough to do a $20/month plan.

    • http://verb0ze.net verboze

      Why people think it's a good idea for a single company to run everything from the carrier to the software on their mobile device is beyond me XD. Freedom of choice is what keeps these companies compete fiercely. If iOS or Android were only available on one network, the customer would end up losing. Remember when ATT had monopoly on the iPhone on their crappy network? Remember how much they cared about us getting good service on their network? Remember what they quickly did when Verizon started carrying it as well?

      • http://codytoombs.wordpress.com Cody

        I'm on AT&T, as I recall there were no real changes after VZW got the iPhone. Windows Phone 7 devices coincidentally came in shortly before then and their Android selection started getting better, but I'd say both of those were inevitable and obvious. Service, pricing and just about everything else stayed exactly the same. Seriously, what did they quickly do?

        Also, as I've stated in the past I think it's way outside of their financial abilities at the moment...Regardless of the reality of it, I actually don't see anything wrong with Google taking over a cellular carrier as long as they don't get so big as to dominate the competition. If 5 years from now there were 4 carriers, ATT VZW SPRINT and Google, all within 20 mil subscribers, I don't see it as much of a problem. If Google held 200 million and everybody else was below 100 million, now it's time to stop it.

        No matter how you look at it though, the existing situation is really bad for customers and the cost of entry is way too high for anybody but the largest corporations in the world to cut in. I'd like to see a company with a different approach try to dig in to this market and give the other companies something to worry about (and truly compete against).

  • Spydie

    I'd say TMO is in a great position right now. They have $4 billion to put into an LTE infrastructure and increase their footprint. HOwever, AT&T is in the worst position of any of the big 4 right now. They are $4 billion poorer with nothing to show for it, right in the middle of rolling out LTE and the worst customer service rating of any of the big 4 for the second year in a row. AT&T service and customer service is going to suffer even further, driving customers away from them. With Verizon have terrible connection problems right now, and Sprint going broke, TMO seems to be in the right spot at the right time to move into a leading position. If they'd put up some towers in Carlsbad, NM, I'd drop ATT and go to TMO. They have no data service here, but their voice service and customer service is top-notch.

    • Anthony

      You don't get it the money goes to DT not T-Mobile and they've made it clear by actions they want out

  • http://www.AndroidPolice.com Artem Russakovskii

    Wow, they gave up way sooner than I thought they would (not that I was against the deal). Definitely the news of the day.

  • hldc1

    This whole acquisition thing was all very interesting. It cracks me up that AT&T wanted to spend $39 billion to basically eliminate a competitor. Now, they'll have to cough up $4 billion and a roaming agreement. Makes that $3.6 billion Verizon spent on AWS spectrum look pretty golden.

    If I was Deutsche Telekom, I wouldn't get into bed with AT&T. I'd work on some sort of joint venture with Dish Network (which has AWS spectrum) or even Verizon (on the verge of acquiring AWS spectrum).

  • http://www.focuszonedevelopment.com Aaron

    For the T-Mobile customers who might be rejoicing about the $4 billion to T-Mobile, think again: the money goes to Deutche Telekom, who has zero interest in investing that money into T-Mobile. It'll all go into their European business.
    So that's $4 billion leaving the U.S. infrastructure. :(
    :DISCLAIMER: I'm a T-Mobile customer and wanted this deal to fall through, so while I'm rejoicing at that, I have no disillusions that T-Mobile will be improving back to where they were pre-deal, much less better.

    • Freak4Dell

      I'm a potential T-Mobile customer, and to me, the roaming agreements and spectrum are more important than the cash. DT can't take that stuff to Europe with them, and having those things added to T-Mobile's assets just makes the network more valuable. It might make DT change their mind and continue operations for a few more years, but even if it doesn't, it makes the network more appealing to another, better, buyer.

  • PattyCakes

    As a very happy T-Mobile subscriber, the thought of becoming an AT&T customer horrified me. Higher prices, spotty coverage, poorly managed network, awful customer service, and a poor selection of Android phones was not something I was looking forward to. I honestly don't know why everyone hates on T-Mobile so much. They're one of the only carriers in the country willing to truly compete on price. And they have coverage everywhere I expect them too. I personally don't want to pay over $100 just because my carrier claims to have coverage in the middle of nowhere.

    • Woof

      Your coverage expectations are pretty low. Out west Tmobile sucks and AT&T is way better. Just shows you can't make blanket statements in a country as large as the US.

      • iFonePhag4S

        I have no idea what you're talking about. My tmo coverage here in Seattle is excellent, I get a solid 10.5Mbps on my HSPA+14.4Mbps phone. It barely ever goes below 10Mbps. As far as I remember Seattle is on the west coast....

        • http://codytoombs.wordpress.com Cody

          Just travel down to Portland or below, where T-Mobile is pretty universally seen as a bad experiment...not to say coverage inside the city would be bad, but the moment you go near the edges it seems to die quickly. Anywhere south of that is hopeless until you're into Sacramento.

          Disclaimer, I'm not a T-Mo customer but a guy I work with is and he's been dying waiting out his contract.

    • http://codytoombs.wordpress.com Cody

      You're right in a way, if the deal had gone through you would have been allowed to enjoy the customer service and higher prices...but the "spotty coverage" would have merged with T-Mo's coverage map when they integrated networks, which means even better coverage than either had before. The Android selection on AT&T was a joke in 2010, but in 2011 they started bringing in some good devices, and now it actually have a pretty decent lineup (still not leading the pack, but they aren't sitting firmly in last place). The issue of "poorly managed network" is up for debate, as I haven't had problems with them and with the news of VZW's 4g/3g problems and Sprint's outages a few months ago, I think it's fair to say that AT&T is at the very least, no worse.

  • Chris

    It was the limbo of waiting for a merger that hurt T-Mobile over anything. It doesn't seem to have seriously pursued any new phones aside from the basic 'obligatory' ones like the SGS II, which Samsung was probably begging them to carry so they could grab even more marketshare.

    On paper, T-Mobile's position at the present isn't untenable, with the second-fastest average network in the US (although AT&T will surpass this with greater LTE rollout). It has a decent amount of spectrum and until the Galaxy Nexus, was Google's US poster child.

    But DT has abandoned them, and is unlikely to spend that fat payout anywhere here, while T-Mobile now suddenly has to get back into the game. Chances are a merger or buyout by another company may be needed to stop the slow decline, and get T-Mobile in the hands of someone that has interest.

  • dre

    One of the main reasons this deal did not get done is because the powers that be in washington did not want unemployment rates to go up. At&t made the smart move, they are going to sit back and let Tmobile die a slow death. Why would apple want to come to Tmobile when google wont put its best phone on tmobile's network? Tmobile is not going to develop lte to make itself still appealing to At&t 4 or 5 years from now. With no lte development, Tmobile will no longer be able to compete with the big boys when it comes to handsets. Tmobile will always have a price point advantage. But price point only last so long.

  • AT&TSucks

    AT&T wants her monopoly back so bad ,
    i hate AT&T so much !!!!
    Evil Company
    AND STOP SENDING ME TRASH IN MY MAILBOX EVERY WEEK !!!
    i'm never coming back to AT&T even if i have to pay more.
    Long Live T-Mobile
    been on it for years great company !!!!