What Now? Reactions, Questions After the AT&T-Mo Failure

12/19/11Follow @curtwoodward

There’s got to be plenty of mixed feelings for all those magenta-clad T-Mobile folks in Bellevue right now. News that AT&T is abandoning its mega-merger attempt to acquire the fourth-place U.S. wireless carrier raises a ton of questions about T-Mobile’s future—none of them particularly reassuring.

Now that AT&T is on the hook for a $4 billion breakup fee and roaming agreement to share airwaves with Deutsche Telekom, will the German parent company find T-Mobile a newly attractive business? That’s definitely not clear, since Deutsche Telekom was trying to get out of the U.S. market entirely with the sale.

T-Mobile could find partners of another variety. Sprint was rumored to be looking at a possible combination with T-Mobile earlier this year, just before the AT&T bid was announced. At that time, Deutsche Telekom Chief Financial Officer Timotheus Hoettges told Bloomberg reporters that “In general, all options are open in the U.S.—the sale of the whole business or of parts.”

Sprint and T-Mobile would still leave a three-carrier market, although one much more balanced than if AT&T had gobbled up T-Mobile. Still, a tie-up between Sprint and T-Mobile would be difficult at best, at least partly because they use very different sets of technology for their networks.

TV companies also could make attractive suitors in a bid to broaden out and compete against the phone giants, with the Dish Network’s CEO on record saying T-Mobile might be a target for his company. That brings up the question of whether the feds would approve a horizontal merger rather than a vertical one, of course.

Washington State Rep. Reuven Carlyle, a Seattle Democrat who has long experience in the wireless industry, says the status quo won’t last long for T-Mobile.

“Given the cost of next-generation wireless infrastructure, I think it’s fair to assume that a long-term change in T-Mobile’s current structure seems inevitable,” Carlyle says. “Whether a partnership with Comcast, Dish Network, Sprint, Clearwire and/or others makes sense, the market will ultimately determine.”

“The marketplace is not perfect by any stretch of the imagination, but in the wireless arena it is far more efficient and effective than government and I fear that one day, elected officials who jumped on board to oppose this merger will regret their decision,” Carlyle says.

Giri Sreenivas, a former T-Mobile manager who is now CEO and co-founder at Seattle startup Mobilisafe, says T-Mobile could continue to compete as a smaller carrier—but that depends on the resources at its disposal.

“I have many sharp friends still there, so I believe the company is positioned to do some great things with their network and pricing positioning,” Sreenivas says. “I think the key thing to track is whether the breakup fee is reinvested into the T-Mobile USA business and what kinds of partnerships can be struck to improve network quality perception, handset options and services.”

Sprint (NASDAQ: S) officials had vigorously opposed the AT&T bid, even filing its own lawsuit against the deal. The Overland Park, KN-based company—majority shareholder of Bellevue’s Clearwire—was predictably jubilant at news of the AT&T deal collapsing.

Vonya B. McCann, Sprint’s senior vice president of government affairs, said in a statement that the breakup was “the right decision for consumers, competition and innovation in the wireless industry.”

“From the beginning, Sprint has stood with consumers who spoke loudly and clearly that AT&T’s proposed takeover of T-Mobile would create an undeniable duopoly that would have resulted in higher prices, less innovation and fewer choices for the American consumer,” McCann wrote.

Sprint also praised the federal regulators and state attorneys general who opposed the deal. Washington state Attorney General Rob McKenna, the Republican frontrunner for governor, was among the state officials opposing the merger. His presumptive Democratic opponent, Congressman Jay Inslee, also didn’t like the AT&T buyout.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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