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AT&T Drops $39 Billion Bid to Purchase T-Mobile

AT&T has officially dropped its bid to purchase T-Mobile USA from Deutsche Telekom AG. Instead, the company said it will enter into a mutually beneficial roaming agreement with the German company.

AT&T's decision to end its bid comes after the Department of Justice filed an antitrust suit against the proposed merger. If the plan had gone through, AT&T would have paid $39 billion for T-Mobile.

"There's been a lot of pressure on this deal, so it's not exactly a surprise [that it came apart] at this point," said Avi Greengart, research director for consumer devices at Current Analysis.

In a statement released this afternoon and posted by MarketWatch, AT&T confirmed that it was calling off the proposed merger, but not before taking a swipe at the DOJ. "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."

Despite AT&T's claims, Greengart said he doesn't think wireless innovation will enter the dark ages as a result of the merger's failure. "I don’t think that investment and innovation are really going to stop one way or the other, and in fact a spectrum crunch could force more innovation and not less. At least in terms of how innovative you are within that spectrum and the techniques you use. Constraints always foster innovation."

However, Greengart did concede that the current spectrum crunch could at least have some impact on the industry. "There are things you can do with a seven-lane highway that you simply can't do with a two-lane highway." Yet, he added, "The overarching issue wasn't something that the AT&T and T-Mobile merger would have solved."

In its antitrust suit, the government stated, "AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market." AT&T is currently the second-largest carrier in the country. If the deal had gone through, the company would have surged past current top dog Verizon to become the nation's largest carrier.

When AT&T first announced the proposal, it stated that if the plan fell through, it would provide T-Mobile with a consolation package worth $7 billion. But according to AT&T's press release, that number looks like it will come down to $4 billion.

Although the AT&T deal may be finished, T-Mobile is still generating interest from perspective buyers. According to Bloomberg, Dish Network said it would bid seek to acquire T-Mobile if AT&T's proposal was canned. Either way, Greengart said, without an investor, T-Mobile could find itself languishing in it's current state for quite some time.

"Consumers in general benefit from having more players including one [such as T-Mobile] who is focusing on offering the best value," Greengart said. In large part [T-Mobile] hasn’t made the investments to compete on pure data speed. And that’s one of the other things that concerns me as an industry observer, that Deutsche Telekom says it is not investing further in T-Mobile. And so a weak T-Mobile does nobody any favors."

via MarketWatch, Bloomberg