It has been a busy few weeks for AT&T.
While many are saying the AT&T T-Mobile “deal is dead”, and AT&T has clearly irritated the FCC staff, AT&T is now finally taking a much more conciliatory attitude.
Our recent report ‘It's all about Spectrum - AT&T T-Mobile Bandwidth matched by Verizon and Sprint’ describes how Verizon and Sprint are both buying control of significant extra spectrum. However, the Verizon AWS spectrum purchase from SpectrumCo. requires FCC approval; and once it approves that deal the FCC will find it difficult to argue that a merged AT&T T-Mobile would have an excessively ‘dominant spectrum position’.
Once the FCC allows Verizon’s spectrum acquisition - and after Sprint’s takes ‘virtual control’ of Clearwire’s spectrum - AT&T will have a very strong case that its ability to compete will be diminished if it is not allowed to acquire T-Mobile.
A complete reversal of the original case.
AT&T is working hard to complete the deal and is thought to have two teams pursuing two parallel options.
Option 1. AT&T is negotiating to divest sufficient spectrum and assets to satisfy the regulators. See:
- ·“The company is considering an offer to divest a significantly larger portion of assets than it had initially expected, said the person, who declined to be identified because the plan isn’t public. Though the exact size of the disposals hasn’t been determined, they could be as much as 40 percent of T-Mobile USA’s assets, the person said.”
- “AT&T has been in discussions with MetroPCS Communications Inc. (PCS) and Leap Wireless International Inc. (LEAP) to sell spectrum and customers as a way of propping up competition in the absence of T-Mobile.”
- “AT&T has been secretly working on an audacious 11th-hour deal to salvage the transaction: AT&T is knee-deep in talks with Leap Wireless, a second-tier but growing wireless player, to sell it a big piece of T-Mobile’s customer accounts and some of its wireless spectrum, according to people involved in the negotiations. AT&T hopes such a deal would placate the Justice Department enough for it to drop its opposition to AT&T’s acquisition of T-Mobile, these people said, or at least to strengthen AT&T’s hand if it goes to trial. The deal would make Leap the fourth-largest wireless carrier in the nation, but it would allow AT&T to retain enough of T-Mobile’s valuable wireless spectrum, which it says it badly needs to provide the kind of next-generation service that its customers expect.”
See Blog: Could AT&T Settlement Catapult Leap and MetroPCS to Top National Status?
Option 2. AT&T is still preparing to fight in court.
- Verizon’s recent actions may have significantly helped AT&T’s case.
- If AT&T makes a new proposal on January 12th DoJ may demand that AT&T refile that proposal with FCC before it goes to trial. [Note: AT&T correctly noted that it is normal to resolve DoJ issues before getting FCC approval. We also noted that in April in: ‘AT&T T-Mobile Acquisition: How long will it take to close?’]
AT&T really…really….really… wants the T-Mobile spectrum for capacity growth and is not likely to give up easily.
But, if AT&T loses at trial there are two other likely options:
Option A. “A network-sharing deal between AT&T and T-Mobile could be established, but this would probably not allow AT&T to reuse T-Mobile's AWS spectrum for LTE. A major blow for AT&T.
Option B. Deutsche Telekom is still anxious to complete the sale as it has major European investment plans for the $39 Billion. It might decide to spin out T-Mobile to a Private Equity partnership pending a later sale to a new player like. Google. [Several options for T-Mobile’s future are summarized in AT&T and T-Mobile: Will there be a Spectrum Fire Sale to Escape Department of Justice and Close the Deal?
We should know by January 12th. 2012, if AT&T can come back with a modified proposal that may be acceptable to DoJ, and then the FCC.
Rethinking US Market Structure and Competition in an IP world.
In a recent policy paper Strategy Analytics suggested that the nature of US Mobile Broadband competition has changed and that ‘All-IP’ networks dramatically change both ‘economies of scope and scale’ and the ‘Relevant Geographic Areas’ that determine Competitive Concentration for Anti-Trust purposes.
See: Policy Insight: New Mobile Industry Structure and 'All-IP' Services change AT&T T-Mobile's 'Spectrum Dominance' and Create new 'Challengers'
There may not however, be sufficient time in the current AT&T case to make such a profound change to the traditional 1980s/90s market analysis. Nor to establish rules for the new digital ‘All-IP’ Mobile Broadband Industry.