AT&T Drops T-Mobile Bid
ROBERT SIEGEL, HOST:
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Wireless giant AT&T announced today that it is ending its bid to acquire rival carrier T-Mobile. AT&T said it needed T-Mobile and its wireless spectrum to serve its customers and their growing hunger for data. But the deal faced fierce opposition from federal regulators. Joining me now is NPR's Joel Rose. Hello, Joel.
JOEL ROSE, BYLINE: Hi, Robert.
SIEGEL: And why did AT&T finally drop its bid for T-Mobile?
ROSE: Well, the company put the blame squarely on federal regulators, which is not a big surprise to people who have been following the merger. The Department of Justice sued to block the deal at the end of August, and the chairman of the Federal Communications Commission said just before Thanksgiving that he would also move to stop it.
The two federal regulators decided that a combination of the nation's second and fourth largest carriers would lead to less competition in the wireless market and, eventually, higher prices for consumers. If the deal had gone through, it would have meant that two huge companies, AT&T and Verizon, would have controlled almost 80 percent of the wireless market in the U.S.
Until today, AT&T had maintained that it was going to defend the $39 billion deal in court early next year, but the company said today that that will not happen, and it will pay a $4 billion charge for backing out.
SIEGEL: A $4 billion charge for backing out, that sounds awfully high. Why so much?
ROSE: Well, AT&T had a lot riding on this deal. AT&T reportedly spent $40 million in advertising and hired some very well-connected former congressmen to lobby for them on Capitol Hill. And the company did get a lot of support for that money from organizations like the Communications Workers of America and the NAACP. AT&T argued that it needed T-Mobile's assets, particularly its wireless spectrum or airwaves, in order to avoid dropped calls and to accommodate the growing demand for data among its consumers, which is pretty much insatiable. But critics of AT&T argued that the company already has a lot of wireless spectrum that it's not using, and they think the real unspoken reason for the merger was that AT&T wanted to put one of its competitors, T-Mobile, out of business.
SIEGEL: And, Joel, what did the federal regulators think of AT&T's claim that this merger would have created thousands of jobs?
ROSE: Regulators were skeptical of those claims. And the FCC actually went back to AT&T earlier this year and asked the company to back up the claim that the merger would create thousands of jobs. AT&T did provide some additional documentation, but in the end, the FCC staff was not convinced. They produced a lengthy report that said they did not find AT&T's analysis credible. AT&T then withdrew its application for the merger from the FCC, in what critics thought was an apparent effort to quash that report, which the FCC then went ahead and released anyway. There were also press reports in recent weeks that AT&T was trying to work out a smaller deal that would satisfy the Department of Justice, but those negotiations apparently did not work out.
SIEGEL: So after accepting future without owning T-Mobile and paying $4 billion for the privilege, what's next for AT&T?
ROSE: Well, CEO Randall Stephenson said in a statement that the company would continue to invest in its networks, which is what critics had urged to do all along, and continue to look for more wireless spectrum. But Stephenson also called on federal policymakers to free up more wireless spectrum because without that, he says the industry is not going be able to grow in the long run.
SIEGEL: OK. Thank you, Joel.
ROSE: Thank you, Robert.
SIEGEL: That's NPR's Joel Rose in New York. Transcript provided by NPR, Copyright NPR.