AT&T conceded defeat Monday in its dramatic standoff with the federal government over one of the largest telecom mergers ever proposed.
The decision by AT&T to abandon its $39 billion bid for T-Mobile amounted to a decisive win for federal regulators — and a counterpoint to critics who claim that Big Business always gets its way in Washington.
AT&T lost despite a nine-month, multimillion lobbying campaign that ultimately fell on deaf ears at the Justice Department and FCC. Regulators decided that the deal would leave wireless customers with too few choices and higher prices.
"In the end, politics didn't prevail,” said Susan Crawford, law professor at Cardozo Law School who served as a tech adviser under President Barack Obama. “On the merits, this was a dead deal; signing up dozens of friendly legislators and spending tens of millions of dollars wasn't enough to give it life."
AT&T said it will remain a top player in the wireless industry.
“AT&T will continue to be aggressive in leading the mobile Internet revolution,” Randall Stephenson, AT&T chairman and CEO, said in a statement.
AT&T first announced its bid for T-Mobile in March, predicting soon after that it would sail through an official review of the deal by the FCC and Department of Justice by early 2012.
But the wireless giant’s plans quickly hit a snag as antitrust watchdogs at DOJ took the matter the court. Following suit months later was the FCC, which began the process of referring the deal to an administrative law judge. Fearing that, AT&T withdrew its application from the FCC.
At the same time, the prospects of salvaging the deal with a settlement before a federal judge began to sour.
Even before federal regulators mounted their campaign against the deal, opponents sought to pillory it as an attempt by AT&T to reunite the baby bells. Companies like Sprint and C Spire, public interest groups and lawmakers sounded alarms that the deal could harm wireless competition and result in fewer choices and higher bills for consumers.
The company will pay T-Mobile a $4 billion breakup fee and enter a “mutually beneficial” roaming agreement with Deutsche Telekom, T-Mobile’s parent company.
Critics of the deal rejoiced over the news.
"This deal has been as good as dead for months because the facts never matched AT&T's fabrications about the benefits of the merger,” Craig Aaron, president of consumer advocacy group Free Press, said in a statement. “The Obama administration deserves praise and credit for standing up to AT&T's relentless lobbying and propaganda.”
“And the American public can breathe a sigh of relief that this time the public interest trumped AT&T's self-serving attempt to kill off what little competition remains in the wireless market," Aaron added.
“This proves that law trumps politics,” Andrew Jay Schwartzman, policy director of the Media Access Project, told POLITICO. “I hope that it emboldens the FCC and the DOJ to take a tough position on future efforts to restrict competition in the wireless space.”
Despite backing away from the transactions, AT&T continued to argue that the wireless sector is one the “most fiercely competitive industries in the world,” a point contested by the deal’s critics and by the government.
Without the deal, AT&T maintained that “customers will be harmed and needed investment will be stifled.”
In order for AT&T to move forward and continue to be a leader in the wireless space, Stephenson argued in a statement that policymakers must “allow the free markets to work so that additional spectrum is available to meet the immediate,” industry needs “including expeditiously approving our acquisition of unused Qualcomm spectrum currently pending before the FCC.”
Michelle Quinn contributed to this report.