AT&T has been working out negotiations to purchase Deutsche Telekom owned, T-Mobile. This week, however, AT&T released a statement announcing that plans to buy T-Mobile had been terminated. The merger deal was met with skepticism from the public, as well as pressure from government regulators fearing that AT&T was creeping dangerously close to a monopoly on the mobile industry. The company struggled for months, talking with third parties, trying anything to breath new life into the stalled merger deal. After thoroughly reviewing all options, the company finally decided to leave the deal completely. This deal breaker has caused a lot of headlines and turned heads, alike.
AT&T had already entered preliminary agreements with Deutsche Telekom, to buy T-Mobile for a whopping $39 billion. Apparently consumers aren't the only people subject to massive fees from mobile carriers. Backing out of the deal is going to cost AT&T a $4 billion "break up" fee, which was agreed upon in early talks with Deutsche Telekom. AT&T said that the fee would be paid and reflected in the fourth quarter of the 2011 fiscal year. Not all deals with Deutsche Telekom were cancelled, however. AT&T also announced they were currently working out a mutually beneficial roaming agreement with Deutsche Telekom.
In their recent statement, AT&T expressed regret that the deal was terminated. Apparently, their regret is not only for the massive fee they incurred. According to the company, the deal was reached with consumer needs in mind. The merger was only intended as a temporary solution to a much larger problem: a shortage of wireless spectrum. Wireless spectrum is the space which is available for wireless carriers to send cellular signals to customers. It can be considered the backbone of the wireless industry. When too many signals are sent in a limited spectrum, it can mean delays and dropped calls for customers.
Randall Stephenson, AT&T chairman and CEO, stated that the company will continue to do what it can to meet the growing needs of its wireless customer base. They intent to continue investing in spectrum wherever possible. He stresses, however, that it's very important that government policy makers cooperate. He specifically mentions the need to release additional spectrum space to auction out to the wireless carriers. AT&T is currently waiting for the FCC to approve their acquisition of unused Qualcomm spectrum. Stephenson also calls on policy makers to anticipate and plan for the U.S.'s ever-growing, long-term spectrum needs.
The FCC was actually the primary government entity responsible for killing the AT&T/T-Mobile deal. The regulatory entity concluded that the merger would result in diminished competition in the mobile industry. Julius Genachowski, chairman of the FCC, responded to the statement released by AT&T. Genachowski stated that the FCC is committed to ensuring a competitive marketplace, which creates jobs and innovation. Unfortunately, the FCC felt that the T-Mobile deal would only reduce jobs and restrict innovation. However, the chairman did add that AT&T was correct in urging Congress to make more spectrum space available for the mobile industry.