Contact: Ben Kolada
In the land of multibillion-dollar telco mergers, sometimes the piecemeal approach is more effective than a one-and-done deal. AT&T attempted to leap over the competition with its proposed $39bn acquisition of T-Mobile USA; however, the world’s largest telecom company fell flat on its face. In failing to secure the T-Mobile takeover, AT&T is on the hook for a hefty $3bn cash breakup fee and must share spectrum in 128 cellular markets with its still-independent competitor. The spectrum loss is of particular irony, considering the primary driver for the T-Mobile purchase in the first place was the target’s spectrum assets.
Rather than pursue another long-shot acquisition, AT&T should focus on smaller spectrum purchases. That’s precisely what its competition has done. While AT&T spent months attempting to persuade politicians and federal regulators to approve the T-Mobile deal, which would have combined the second- and fourth-largest wireless carriers in the US, Verizon was dutifully seeking out smaller spectrum buys. Just this month, the company announced a pair of spectrum transactions worth a combined total of nearly $4 billion – the same price as the pretax charge AT&T will take in the fourth quarter (that charge includes the $1bn book value for the spectrum agreement with T-Mobile). Meanwhile, AT&T still hasn’t received FCC approval for its $1.9bn acquisition of certain Qualcomm spectrum licenses, which was announced back in December 2010.