Failed merger blues

AT&T and T-Mobile USA are back to where they were in early March when the US wireless operator first made an offer to buy its smaller rival from Germany. AT&T still needs new spectrum and T-Mobile USA a new buyer.

Back in March, both companies were short of wireless airwaves to be able to compete in the market for high-speed Internet broadband services.

But Deutsche Telekom, which owns T-Mobile USA, made it clear it wanted to avoid any expensive investments and signaled its interest to exit the US market instead.

A merger appeared to be the perfect solution. Or so the two operators thought.

Largest US wireless opeator

On Monday, AT&T decided to drop its $39 billion (29.9 billion euro) bid for T-Mobile USA, having failed to overcome opposition to a deal that would have created the largest mobile communications operator in the country.

The deal met fierce competition from the US Department of Justice, the Federal Communications Commission, rival operators and numerous consumer advocate groups.

Their criticism centered largely on concerns that the wireless marketplace would face higher prices and reduced innovation as a result of the merger.

AT&T put up a tough fight.

To win regulatory approval, the company offered concessions, including potentially selling more than a quarter of T-Mobile USA's customers and some spectrum to competitors as well as possible network-sharing agreements.

But regulators didn't nibble.

The Justice Department took the aggressive step of suing to block the deal in late August, while the FCC signalled its intent to fight the merger to the end.

Spectrum shortage

The decision to scrap the takeover is a major setback for AT&T, which had pinned its hope for growth on the acquisition. The wireless operator, the second largest in the US, said it needed to buy T-Mobile to help relieve its congested network and have sufficient spectrum to expand into new mobile broadband Internet services.

Data-hungry devices like the iPhone and the iPad have led to huge demand for wireless broadband connectivity, straining capacity in many existing networks.

Additional spectrum is needed not only to relieve congestion in those networks but also to build out new fourth-generation wireless networks that are said to offer DSL data transmissions speeds equivalent to those on a fixed-line.

The deal's end also leaves T-Mobile with an uncertain future.

Once a cash cow, T-Mobile USA has been losing customers. The smallest of the big four US wireless operators, T-Mobile USA has also shown the least interest in making the necessary investments in LTE, or Long-Term Evolution, as the next-generation (4G) technology is called.

Deutsche Telekom saw the deal with AT&T as an ideal opportunity to exit the US market and walk away with billions of dollars to focus on Europe.

It is now looking for a new buyer, with rivals like Sprint considered possible candidates.

AT&T says it aims to continue investing in expanding its network and has warned lawmakers they will have to take action to increase availability of wireless spectrum.

Author: John Blau (Reuters, AP)
Editor: Zulfikar Abbany