T-Mobile Running Out Of Moves - InformationWeek

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Commentary
11/22/2011
08:48 PM
Eric Zeman
Eric Zeman
Commentary
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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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Les Moor
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Les Moor,
User Rank: Apprentice
11/23/2011 | 3:02:22 PM
re: T-Mobile Running Out Of Moves
As a long time T-Mo customer I am happy to see that likely I won't be a future AT&T customer, and I think that many other T-Mo customers feel the same way. The merger was a bad idea for customers and the industry, and I feel confident that T-Mo will survive.
charlesrwelty
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charlesrwelty,
User Rank: Apprentice
11/23/2011 | 3:08:33 PM
re: T-Mobile Running Out Of Moves
Julius Genachowski
Yeah, so what?
The guy's a tool of Obama (no investment genius) and Jon Corzine.
tyuiop
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tyuiop,
User Rank: Apprentice
11/23/2011 | 3:40:38 PM
re: T-Mobile Running Out Of Moves
les +1. i can have either where i live. i have t-m. it's better all the way around. breid
Net2Biz
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Net2Biz,
User Rank: Apprentice
11/23/2011 | 3:48:18 PM
re: T-Mobile Running Out Of Moves
I'm OLD, and my friends and family and I have been ripped off and cheated by AT&T at every turn for 30+ years that I have been paying AT&T for SOMETHING. Lot's of stories there, but they just make me tired. On the other hand, I have been very happy with T-Mobile for the past 10 years or so. I am now in "wait" mode to see if I should renew any contracts or if I will have to go elsewhere to avoid paying AT&T another bill.
mctrog007
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mctrog007,
User Rank: Apprentice
11/23/2011 | 4:16:19 PM
re: T-Mobile Running Out Of Moves
I had AT&T about 10 years back, they wanted to charge me for outstanding calls made by anoher person that lived in the house. The fact that the phone was registered to her, not me, that I didn't have access to the account made no difference. I lived there too so they tried to hold me accountable. Told them to take a hile and went down to T-mobil and had a phone in my hands in 15 minutes and have been with them since.
You couldn't pay me to go back to AT&T. I'd rather give up my cell first than use one of theirs.

AT&T
Awfull telegraph and telephone
Chris Spera
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Chris Spera,
User Rank: Apprentice
11/23/2011 | 5:51:20 PM
re: T-Mobile Running Out Of Moves
I agree that its going to be difficult for the merger to be completed given this turn of events. I agree that AT&T has rotten billing policies, rotten customer service, and in some MAJOR markets (I live in Chicago), some of the worst operational coverage (vs. the coverage map) I have ever experienced. I think AT&T was seriously looking for T-Mobile to help bolster it in all three of those areas, and they just aren't going to get it.

What's the most interesting is that AT&T is offering billions in cash as well as spectrum it really CAN'T afford to lose to T-Mobile if the merger doesn't get approved. The cash aside, the spectrum is something that it can't afford to lose to T-Mobile or anyone else.

From a network perspective, if the merger gets approved, that's where the most value will come for me. The coverage would immediately improve here and even out in Chicago, and its likely that would make many users happy. However, come billing time, things may get very ugly as orange and magenta may not make a very pretty color at all...

I'm not holding my breath on this one. I'm an ex-AT&T and current T-Mobile customer for a reason...and besides...I bought an unlocked iPhone 4S so 3G/4G or not, I've got my iOS.
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.
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.
foobah
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foobah,
User Rank: Apprentice
11/23/2011 | 8:24:48 PM
re: T-Mobile Running Out Of Moves
Huh?
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).
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