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11/22/2011
08:48 PM
Eric Zeman
Eric Zeman
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T-Mobile Running Out Of Moves

The FCC handed a near-death sentence to AT&T's attempts to acquire T-Mobile USA. What options remain?

Federal Communications Commission chairman Julius Genachowski said on Tuesday that he doesn't think AT&T's proposed acquisition of T-Mobile USA is good for Americans. In fact, it appears he thinks the idea is downright bad for Americans.

Genachowski filed a draft order with his fellow commissioners, stating that the acquisition should be reviewed by an administrative law judge. The FCC itself does not have the authority to block the acquisition, but can send the deal to a judge, who can in turn take the necessary steps to prevent the merger from happening.

Genachowski said that the FCC has reviewed hundreds of thousands of pages of material, met with both AT&T and T-Mobile dozens of times, and received 50 separate petitions seeking to block the merger.

It has concluded that the merger would create "unprecedented consolidation" in the wireless industry, resulting in "massive job losses" and millions of dollars of lost of investment. Genachowski said quite bluntly that the deal is not in the best interests of consumers. Of course, AT&T has preached the opposite of this, stating that the deal will create tens of thousands of jobs and spur further investment.

The FCC has to agree to the draft order, which won't happen until the group convenes mid-December. If the entire commission agrees with Genachowski, then a trial date will be set complete with witnesses and testimony, etc. The bad news for AT&T is that this trial won't take place until after the Department of Justice takes its shot at AT&T, which isn't scheduled to start until February.

With both the Justice Department and the FCC aligning against the merger, there's little chance of success left for AT&T.

"The FCC's action today is disappointing," said Larry Solomon, senior vice president of Corporate Communications, AT&T. "It is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the U.S. economy desperately needs both. At this time, we are reviewing all options."

So, what exactly are AT&T's options and, more importantly, what are T-Mobile USA's options?

AT&T can soldier on--and probably will, despite the money it will lose pursuing its case. It will have to face the Department of Justice in court, the FCC in court, and Sprint and C Spire Wireless in court. AT&T had originally hoped to close the deal by March 2012. Now there's a snowball's chance in hell of that happening.

If everything falls apart, however, T-Mobile is left hanging in the wind.

It's no secret that Deutsche Telekom, T-Mobile USA's parent company, wants to sell the fourth-place U.S. carrier. But who's left to buy it? Sprint no longer has the cash, and it never really made sense for Sprint to buy T-Mobile USA anyway. Private investors are a possibility, but the amount of capital they'd have to raise is in the tens of billions.

The one silver lining here is that AT&T has agreed to give T-Mobile USA a massive break-up fee, totaling about $6 billion in cash and wireless assets (spectrum). Given T-Mobile's aggressive roll-out of HSPA+, and impressive roster of high-end, appealing smartphones, the company has a shot. Fresh with some more cash and spectrum assets, it is possible (however unlikely) that T-Mobile can make something of itself.

Any way you look at it, though, the future is murky for both AT&T and T-Mobile. AT&T stands to lose billions in court and break-up costs--which will surely annoy investors to no end--and T-Mobile/Deutsche Telekom stand to lose the only suitor it has had in the last few years.

Understandably, Sprint is dancing all sorts of happy dances. In a statement provided to media, Vonya McCann, Sprint’s Senior Vice President of Government Affairs, said, "As Chairman Genachowski said in August when the Justice Department filed its antitrust lawsuit against AT&T, the record before the FCC presented, 'serious concerns about the impact of the proposed transaction on competition.' That record is complete and more than justifies moving this matter to an Administrative Law Judge for a hearing. We appreciate Chairman Genachowski's leadership on this issue and look forward to the FCC moving quickly to adopt a strong hearing designation order."

Sprint has strongly opposed the acquisition since day one.

The Communications Workers of America has sided with AT&T, and issued its own statement Tuesday evening in support of AT&T.

"The action by the Federal Communications Commission on the AT&T/T-Mobile merger is a job killer at a time of 9% unemployment. Our T-Mobile members know that the path to secure jobs is through massive investment in a 4G LTE network across America. T-Mobile management has clearly stated that the company doesn't have the scale to justify that investment. The FCC's decision relegates the issue of good jobs to the bottom of the government's priorities."

If the FCC's decision today isn't the final nail in the coffin, it is at least placing the lid on casket.

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Chris Spera
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Chris Spera,
User Rank: Apprentice
11/28/2011 | 3:46:05 PM
re: T-Mobile Running Out Of Moves
I saw an article over the holiday weekend that indicated that in order to get the FCC and DoJ to buy-off on the merger, AT&T is proposing to sell off 40% of the T-Mobile assets, once acquired. This includes not only CUSTOMERS, but SPECTRUM as well. AT&T finds itself in a difficult spot at this point. It can't afford the $3+ billion in cash as well as the spectrum it promised to T-Mo if the merger was not approved. From what I understand of the deal, it really can't (and doesn't want to) afford to dump the spectrum, and they want to keep the newly acquired customers as well. In order to get the deal approved, they will have to withdraw and resubmit the approval request.

Any way, AT&T looks at this, it seems its going to find itself in a difficult place, having to either come up with cash and spectrum to pass to T-Mobile as part of the "failure penalty" they agreed to, or an agreement to sell off almost half of what they acquired.
Spud Coolzip
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Spud Coolzip,
User Rank: Apprentice
11/24/2011 | 3:14:06 PM
re: T-Mobile Running Out Of Moves
I don't know if this makes any business sense or not, but if DT is determined to unload T-Mo, I'd like to see Google buy them. Google started to dip its toe into telecom a few years ago but pulled back. Not that I love Google, but I distrust them far less than AT&T and I can't think of any other company with deep enough pockets to buy them, other than the control freaks at Apple. (Steve Jobs did seriously consider operating an Apple wireless network.) I would be very happy to have a combination of fixed and mobile wireless broadband.
FBel
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FBel,
User Rank: Apprentice
11/23/2011 | 10:46:03 PM
re: T-Mobile Running Out Of Moves
@Exit...Been reading long? I believe the poster made it quite clear that the account was not in his/her name, so when does that become his/her bill? BTW, I am a proud Dem!
YMOM100
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YMOM100,
User Rank: Apprentice
11/23/2011 | 10:20:00 PM
re: T-Mobile Running Out Of Moves
You are employing Republican logic aka nonsense. T-Mobile is doing rather well and it is not as if T-Mobile will go down the drain if the merger fails. The motivation for the merger is that the Deutsche Telekom wants to get out of the US cell phone market, because it makes not enough money (it still makes money). Deutsche Telekom searched for a buyer and AT&T was eager to jump on it before anyone else can get it. AT&T is only interested in buying up more licensed bandwidth, of which they already have tons that is left unused. But AT&T rather leaves it idle than have the competition use it.
So when you claim the FCC draft is a "disaster" then you fail to see that a merger will not be of any benefit to consumers, will not advance mobile networks, will not keep a low cost provider (T-Mobile) around, and definitely will not foster competition. That is the Republicans for you, no clue about the economy. Why do you think there are 6 million jobs lost since the Bush era economic policies kicked in?
YMOM100
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YMOM100,
User Rank: Apprentice
11/23/2011 | 10:12:06 PM
re: T-Mobile Running Out Of Moves
Why is T-Mobile running out of moves? T-Mobile is doing rather well as a company (not as well as Telekom in Germany wants to) and if the merger falls through AT&T is contractually obliged to pay T-Mobile a nice sum of cash.
T-Mobile always served me well at a price point that no other provider can offer.
Exit to Shell
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Exit to Shell,
User Rank: Apprentice
11/23/2011 | 8:47:19 PM
re: T-Mobile Running Out Of Moves
So you're mad because they wanted you to pay your bill. Let me guess... democrat?
Exit to Shell
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Exit to Shell,
User Rank: Apprentice
11/23/2011 | 8:36:50 PM
re: T-Mobile Running Out Of Moves
I've used AT&T as a carrier for over a decade. They have the fastest network and I have never experienced any problems with service. Without the merger, t-mobile goes bankrupt. Sprint? Bwaa Ha Ha Ha. Of course they don't want the merger. They'll be out of business before too long as well (according to my crystal ball).
foobah
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foobah,
User Rank: Apprentice
11/23/2011 | 8:24:48 PM
re: T-Mobile Running Out Of Moves
Huh?
foobah
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foobah,
User Rank: Apprentice
11/23/2011 | 8:22:07 PM
re: T-Mobile Running Out Of Moves
As a T-Mobile prepaid customer I have been hoping this merger would not be approved, since I fear my plan would disappear or be seriously damaged once AT&T gets their mitts on it. Geez Louse, I've had so many problems with the remnant of AT&T (home phone) I still have to deal with. Hey T-Mobile! Advertise! Tell people what you got! I couldn't be happier than with my $50/month prepaid, no-contract smartphone plan.
rhawkins982
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rhawkins982,
User Rank: Apprentice
11/23/2011 | 8:20:31 PM
re: T-Mobile Running Out Of Moves
So, if the Chairman believes the proposed merger would be bad for Americans, presumably he believes the only option, a bankrupt T-Mobile would be good for Americans. I wonder where he went to school? And did he graduate? Possibly not. These Democratic appointments are a disaster.
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