AT&T pulls back on T-Mobile deal, Sprint loses either way

AT&T made a tactical move on Thanksgiving, withdrawing the license transfer applications it had filed with the Federal Communications Commission (FCC), in order to purchase T-Mobile from Deutsche Telekom for $39 billion.

While AT&T said it's prepared to pay Deutsche Telekom the approximately $4 billion in "break up fees" promised if the deal didn't go through, the pair have hardly given up. They will continue to pursue the sale, they said in a Nov. 24 statement, adding that they took the step in order to "facilitate the consideration of all options at the FCC and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice either through litigation ... or other means."

In August, the DOJ filed a complaint in a D.C. federal court, seeking to block the deal, which in September was joined by the attorneys general of seven states (CP: DOJ suit against AT&T, T-Mobile deal joined by 7 states). Last week, FCC Chairman Julius Genachowski announced that he didn't see how the deal would serve the public interest, and asked his fellow commissioners to vote for a judge to hear the case.

Analysts, speaking with The New York Times, said the deal could have a better chance if AT&T agrees sell 40% or so of the assets it acquires with T-Mobile to competitors such as Sprint and MetroPCS. That raises the question, however, of whether it's worth it to AT&T to boost competitors' spectrum while increasing its own.

Analysis from Reuters suggested that the failure of the AT&T deal could have the "paradoxical result of making Sprint's position even more untenable."

Phil Marshall, with Tolaga Research, told Reuters that Sprint's biggest problem is also its main selling point: its unlimited data plan, the only one left among the big-four carriers.

"Unlimited is going to kill them," Marshall said in the report, adding that Sprint's LTE plans-- which depend on 10 megahertz of spectrum to rivals' 20 megahertz; spectrum taken from its iDen network, which it hopes to turn off in 2013; and some help from Clearwire, a struggling partner but one whose WiMax network offers Sprint a way to piggyback its LTE-- is "bare bones."

If the AT&T deal fails, reported Reuters, T-Mobile could look for a new partner in a cable company such as Comcast or Time Warner — companies that, as part-owners of Clearwire, investors hoped would be allies to Sprint as it tries to grow its LTE network.

If the AT&T deal is approved, the Mexico-based carrier América Móvil could be quick to go after the T-Mobile assets AT&T will need to unload, said the Times. Consultant Berge Ayvazian added the result could be that the already healthy company could become the "number 4 competitor in this market."