AT&T and T-Mobile: Is the Merger Over?

AT&T and T-Mobile announced earlier this year that they were planning to merge, as Deutsche Telekom, a worldwide wireless company, felt it couldn’t innovate or compete and was getting out of the market. Considering AT&T’s…ah…reputation for customer service and network stability, the news was not exactly greeted with praise.

Now it’s starting to look like that hostility is going to put an end to the merger for good.

AT&T essentially wants to buy T-Mobile not because its business is so valuable, but because it has certain spectrum and infrastructure already built that AT&T would have to pay billions for. The problem really is that this comes with 33 million customers and would create a wireless company that dwarfs the other competitors.

So, the government has stepped in. Here’s precisely what’s going on:

• The Justice Department is suing to stop the merger because they believe it violates anti-trust law. Justice argues that on a national level, it would limit competition too much. AT&T argues that regional providers are enough competition for it. Most think it’s unlikely the courts will agree.
• Sprint, which has already taken its case to Congress and vocally criticized the deal, had decided to take it one step further and gone to court. Part of this is basically anti-trust argument and part of it is old bad blood: Sprint is descended from MCI, the company that broke up AT&T back when it had a complete monopoly on all telephones, and opposes seeing AT&T and Verizon, two companies descended from said monopoly.
• Of course, all of this may be moot because the FCC, which before had been needling AT&T at length and uncovered some pretty embarrassing documents, has pretty much bluntly said that they’ve never approved a merger the DOJ has challenged in court. The FCC is the final word: if they say no, the deal is dead.

In short, the merger, if it’s not already in the grave, is on life support. One thing that won’t change? T-Mobile subscribers will, like it or not, be switching providers: Deutsche Telekom will be selling off T-Mobile’s assets and shutting it down, either way. And AT&T may still be able to salvage the merger by giving away assets like bandwidth or letting T-Mobile’s customers go where they may.

But it’s a lot more likely that instead this is one corporate marriage that isn’t going to make it to the altar. Oh well, they probably wouldn’t have gotten along anyway.