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Any consumer who has ever paid an early termination contract cancellation fee to a wireless carrier might feel a little satisfaction today knowing AT&T’s languishing deal to acquire T-Mobile comes with its own $3 billion dollar penalty payable to Deutsche Telekom if the merger fails to come to fruition.
Sachin Shah, merger arbitrage strategist with Tullett Prebon Americas Corp., suggests that $3 billion dollar fee (and the spectrum giveaway that goes with it) delivers a real incentive for AT&T executives to find a way to force the deal through, and their next venue will likely be federal court in the District of Columbia to keep the government from getting a preliminary injunction against the merger deal.
For AT&T, any legal action will certainly cost far less than $3 billion dollars, so the company has little to lose rolling the dice trying to find a remedy in a district court that has become increasingly business-friendly.
Shah believes yesterday’s announcement by the Justice Department also provides additional paths for AT&T to consider:
- Renegotiate the deal: AT&T could go back to the bargaining table with T-Mobile and return to the DOJ with an amended proposal it hopes will be more acceptable to the government’s antitrust lawyers;
- Reboot the lobbying campaign: AT&T could claim scuttling the deal will cost American jobs — a particularly sensitive topic with unemployment around 9 percent;
- Re-engage AT&T Employee Unions: The Communications Workers of America are true believers in the AT&T/T-Mobile deal, if only because it is likely to broaden union membership to include T-Mobile workers. Shah thinks the unions might speak to a more receptive audience among certain union-friendly lawmakers who have also been concerned AT&T will use the merger to clear-cut T-Mobile’s employees.
Shah thinks the Justice Department has not entirely slammed the door shut on AT&T’s proposed merger, and there have been precedents of DOJ lawyers changing their minds.
Meanwhile, the Federal Communications Commission, quieter than a church mouse ever since the deal was announced, apparently found cover from the DOJ decision, and FCC Chairman Julius Genachowski delivered his own “me too” statement hours after the Justice Department announced their lawsuit:
“By filing suit today, the Department of Justice has concluded that AT&T’s acquisition of T-Mobile would substantially lessen competition in violation of the antitrust laws,” Genachowski said. “Competition is an essential component of the FCC’s statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition. Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile. Competition fosters consumer benefits, including more choices, better service and lower prices.”
[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg DOJ Lawsuit Not Unexpected 8-31-11.flv[/flv]
Sachin Shah says the U.S. Justice Department’s lawsuit to block AT&T Inc.’s proposed $39 billion takeover of T-Mobile USA Inc. does not mean the deal is dead. He speaks with Lisa Murphy on Bloomberg Television’s “Fast Forward.” (5 minutes)
I think this is hilarious. They could have expanded their network and rolled out LTE for $3.8bn… instead they want to spend $39bn to buy their competitor. Now with the DOJ saying “hell no,” they’re gonna be out $3bn. So they should have just done it the right way and built out their network for $3.8bn. At this rate, it’ll cost them almost $7bn to build out their network.
I’ve never hated a company more, and everything about this buyout demonstrates what I hate about them. Burn, AT&T.
They’ll do what they’ve always done before, pass along the costs to their customers who don’t have much of a choice in many markets anyway.
I don’t get how Skype is an ‘indirect competitor’ according to this guy. It’s not like you can use Skype everywhere like you can a cell phone. You’d need wi-fi, which is not as prevalent as cell coverage.
You can call via Skype over a 3G data connection on your iPhone. The issue for providers is how they can keep it from eating into their profits by people making the switch to VOIP. Network neutrality and market or political pressure will ensure that their hands are tied, thus they have to offer full access to apps such as Skype, and Google Voice. Thus to combat that threat they simply charge exorbitant amounts for data service so they’re less reliant on the income from per minute calling fees on their plans. Essentially the same tactic from Telco’s as their… Read more »
Maybe not Skype, but certainly Google Voice – anywhere you have cell reception and a smartphone.
And in Canada, the big three are treating this as a competitive threat, and pricing data sky high to avoid people switching to VOIP.
If you think the AT&T and its Unions are operating at the best interest of the customers of AT&T and/or their own internal customers- the membership – think again. This organization falls into the worst description of politics. The inside deals back room agreements and the slicing and dicing of the members and consumers to further the feathering of the leaders nest is apparent. Check out the recent natural disasters. AT&T is forcing VOIP telephone service. If the internet goes down so does your phone. If power outages occur with VOIP so does the land line. Copper cost too much… Read more »