AT&T has decided to officially kill off a $39 billion deal with T-Mobile that would have created the nation’s largest wireless company by a long shot, the wireless service provider announced on Monday. The company said continuous resistance from the U.S. government forced its cancellation of a bid to purchase T-Mobile from telecommunications company Deutsche Telekom this week.
AT&T Deal Could Hurt Customers and Employees
In March, AT&T made the announcement that it planned to acquire T-Mobile for a whopping $39 billion in cash and stocks, which could make AT&T the largest wireless entity in the U.S. with a total of nearly 130 million subscribers (95 million from AT&T and 34 million from T-Mobile).
Shortly after the announcement, concerns surfaced that T-Mobile customers could pay more for service under speculation that AT&T would eventually increase customer rates due to reduced competition and increased freedom to charge as they desired.
In September, the AT&T and T-Mobile merger was blocked by a lawsuit filed by the Justice Department citing its own concerns that customers would be subjected to higher prices, worse service and fewer package options. Simultaneously, thousands of workers could be in danger of losing their jobs.
After pressure from the government mounted for AT&T to cancel its T-Mobile buyout deal, the company relented.
Canceled T-Mobile Buyout Leads to Continued Data Shortage
AT&T claimed in its announcement that the T-Mobile buyout was necessary because it would have cured consumers’ rising demand for data due to an increase in smartphones and tablets.
“The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage,” said Randall Stephenson, AT&T’s CEO, in a prepared statement. “In the absence of such steps, customers will be harmed and needed investment will be stifled.”
However, government officials have said that the nation’s second-largest wireless provider consuming the fourth-largest would have created a mega-company that would have been more problematic than beneficial.
In the wake of its ended bid, AT&T said it is working on other ways to satisfy customers’ increasing data demands. It is currently vying for regulatory approval of its $1.9 billion spectrum purchase from Qualcomm.
Also, to formally resolve its deal with T-Mobile, AT&T says it will pay Deutsche Telekom a $3 billion breakup fee and allocate $1 billion worth of spectrum to the company before the year’s end. It also plans to enter into a roaming agreement with T-Mobile that will allow customers of both wireless companies to use the other’s network.
