AT&T Withdraws Merger Application

On Thursday, November 24 AT&T announced that it withdrew the application that it submitted to the Federal Communications Commission in order to acquire T-Mobile. With this withdrawal there will be more than $4 billion in “break-up” fees.

AT&T made sure to clarify that although it did withdraw the application which was submitted to the FCC, the deal is not dead. The company claims that instead it will focus on the antitrust lawsuit that the Department of Justice brought forward. The lawsuit is seeking to block the merger, due to the concern about competition issues.

"AT&T Inc. and [T-Mobile parent company] Deutsche Telekom AG are continuing to pursue the sale of Deutsche Telekom's U.S. wireless assets to AT&T and are taking this step to facilitate the consideration of all options at the FCC and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice either through the litigation pending before the United States District Court for the District of Columbia ... or alternate means," AT&T said in a statement. "As soon as practical, AT&T Inc. and Deutsche Telekom AG intend to seek the necessary FCC approval."

The decision to withdraw the merger application came just two days after Julius Genachowski, the chairman of the FCC, suggested that the merger was not in the interest of the public and advised the other commissioners to send the merger application for review to an administrative judge.

"The record clearly shows that—in no uncertain terms—this merger would result in a massive loss of U.S. jobs and investment," said a senior FCC official.

The chairman basically recommended that the deal be rejected; however, it is important to note that the FCC cannot technically block a deal. The FCC only has the ability to approve, approve with conditions or refer to an administrative law judge. When the FCC was reviewing the deal, they said that if AT&T and T-Mobile were to merge, the result would be massive layoffs. The case will go to trial in February.

There are several different consumer groups that feel that the withdraw of the merger application is meant as a last effort to save the merger.

"After today's actions, the chances that AT&T will take over T-Mobile are almost gone," President and Co-founder of Public Knowledge Gigi B. Sohn said in a statement. "While you can never count out AT&T entirely, the fact that they pulled their FCC application speaks volumes about the company's lack of confidence that it could prove in a legal setting at the Federal Communications Commission (FCC) the claims it spent millions of dollars to make about job creation and rural deployment of broadband, among other issues."

Sohn said that she believes that AT&T is attempting to "prevent the FCC from making public its many, well-documented findings that the deal is not in the public interest."

The Senior Vice President and Policy Director of Media Access Project Andrew Jay Schwartzman said that this decision from AT&T is an "act of desperation." "It is time for vainglorious managers at AT&T to accept that there is no way that this deal can obtain approval of the FCC and the courts," he said.

Source: PCMag - AT&T Pulls T-Mobile Merger Application From FCC, Will Take $4B Charge

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T-Mobile Reports An Increase in U.S. Customers

It was announced on Thursday, November 10 that T-Mobile has been able to increase its number of U.S. customers during the last quarter. This is the first time that the company has been able to do so in over a year.

"A decline of 186,000 contract customers in the third quarter was offset by an increase in prepay customers of 312,000," Deutsche Telekom, T-Mobile's parent company, stated during an earnings report.

Deutsche Telekom seemed to be very surprised by the progress that T-Mobile had made. They said that T-Mobile had "reported somewhat more positive development than in past quarters."

Deutsche Telekom went on to say that, on average, T-Mobile brings in about $14 per customer in revenue. This is a 13 percent jump from this time last year. Although T-Mobile is the only carrier out of the four major U.S. carriers to not offer the iPhone, it reported that the number of its customers with smartphones has increased by 40 percent, reaching 10.1 million customers.

"The improvement in earnings was largely attributable to successful savings initiatives and new rate plans without subsidized handsets," Deutsche Telekom said.
So, the big question is whether or not these improvements will affect AT&T’s efforts to purchase T-Mobile. One of AT&T’s main points during a recent Department of Justice lawsuit was that T-Mobile is going downhill and can only be saved if a company like AT&T saves it.

In September, in response to the DOJ, AT&T said that different rivals like Sprint are unable to "explain how T-Mobile, the only major carrier to have actually lost subscribers in a robustly growing market, provides a unique competitive constraint on AT&T."

"For the past two years, T-Mobile has been losing customers despite growing demand, and, without the spectrum to deploy a 4G LTE network such as that deployed by the other carriers, there is no reason to expect a change in its undifferentiated competitive significance," AT&T continued.

There is also a major debate about if the AT&T and T-Mobile merger were to occur whether or not it would create or kill jobs. The Communication Workers of America put out a report on Tuesday that said that the merger would create thousands of job, and the Economic Policy Institute said that a merger between the two mobile carriers could create somewhere between 55,000 and 96,000 jobs over the next seven years. They did, however, mention that this would only occur if AT&T followed through on its promise to invest $8 billion into its infrastructure over the seven year period.

However, the director of the Center for Economics and Public Policy at the University of California at Irvine, David Neumark, said in a report released in August that "AT&T has actually told investors and the federal government that the merger would lead to reduced capital expenditures on net. If you take EPI's own logic and apply that net reduction in capital expenditures to the data, you predict fewer jobs, not more jobs."

Who knows what will happen? AT&T is clearly the stronger company, but it is also apparent that T-Mobile is taking steps towards being a much more successful mobile carrier. Who knows if T-Mobile has enough time to save themselves though? One successful quarter does not mean that they are necessarily heading in the right direction overall. We’ll just all have to wait and see how it goes.

Source: PCMag - T-Mobile Adds Customers as Battle Over AT&T Merger Continues

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