AT&T-T-Mobile deal too big to go through

AT&T used all its lobbying muscle to get this deal approved, but regulators and market realities got in the way.

Kai Ryssdal: Joining the tax cut extension in the pile of things left undone at year's end is AT&T's hopes for merger with T-Mobile. It would have been a $39 billion deal, but for AT&T walking away yesterday in the face of Justice Department opposition.

AT&T was so confident this thing would go through, that it promised a $3 billion breakup fee to T-Mobile's parent company Deutsche Telekom if it all went kerflooey. They spent millions of dollars on ads and lobbyists trying to make its case that this deal would be good for consumers and the U.S. economy.

So, given they had that kind of confidence going in, why didn't AT&T prevail? From Washington, Marketplace's David Gura reports.

David Gura: When a deal like this one is announced, lobbyists don’t waste time.

George Foote is a telecom lawyer with the firm Dorsey & Whitney, and he says AT&T’s team is legendary.

George Foote: Their in-house people are so well respected, and they’re so well-connected, and they’ve been so involved for so long in Washington, that you can be sure that they touched every possible base.

The Justice Department, the Federal Communications Commission, Capitol Hill. And AT&T also hired outside help -- former congressmen, former White House officials. And the company ran ads.

AT&T ad: It’s the AT&T network, and we’re planning to combine with T-Mobile to deliver a better, stronger network, adding thousands of new cell sites to deliver better service and the most-advanced mobile broadband experience.

But, Foote says, even lobbying has its limits.

Foote: Sometimes the legal principles and the economic forces that you’re trying to take on are just too great.

Regulators and lawmakers were concerned about what this deal would do.  Robert Frieden teaches law at Penn State. He says there would’ve been Verizon, AT&T -- and not much else.

Robert Frieden: Nobody wants to see a duopoly controlling 85, 90 percent of the marketplace. 

Sprint fought the merger. So did consumer advocates. Frieden says regulators are starting to take a harder line.

Frieden: If you’re going to buy out a competitor, you’ve got to make some very compelling arguments, and use empirical proof to show that you’re not harming the marketplace and you’re not harming consumers.

And that may make it harder for mega-deals like this one to get approved.

In Washington, I'm David Gura for Marketplace.

About the author

David Gura is a reporter for Marketplace, based in the Washington, D.C. bureau.
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You guys missed the mark. The reason this deal didn't go through was due to that AT&T document which was accidently posted on the FCC website by AT&T's legal firm, Arnold & Porter LLC. It clearly showed AT&T's justification for the merger was hallow.
Say what you will about the regulatory environment, etc. It was the content of that document which made it impossible for the DOJ/FCC to approve the deal. Unfortunately, that deal would have sailed through had that document remained confidential.

Considering that T-Mobile is going under anyway I don't entirely follow the justice department’s reasoning. We are likely going to have one less competitor in any case.

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