AT&T finally ditched its plan to buy T-Mobile USA for $39 billion on Monday, after months of intense lobbying.
AT&T blamed regulators for the deal’s demise, and the company said in a statement that consumers would be harmed and investment would be stifled as a result. Meanwhile, the U.S. Department of Justice and the Federal Communications Commission–the two agencies that opposed the deal–said that AT&T’s decision to abandon its purchase was a victory for consumers.
“Consumers won today,” Acting Assistant Attorney General for the Antitrust Division Sharis A. Pozen said in a statement. “Had AT&T acquired T-Mobile, consumers in the wireless marketplace would have faced higher prices and reduced innovation. We sued to protect consumers who rely on competition in this important industry. With the parties’ abandonment, we achieved that result.”
Consumer groups also praised AT&T’s decision to give up. But what does all of this really mean for consumers? CNET put together this FAQ to answer that question.
What did AT&T actually decide to do?
AT&T said that it would not continue to pursue the $39 billion merger of T-Mobile USA, which it announced in March. As part of the break-up with Deutsche Telekom, T-Mobile’s parent company, it will have to pay a fee of $3 billion in cash to Deutsche Telekom as well as provide $1 billion in wireless assets.
The Justice Department had filed its lawsuit against AT&T to block the merger in August, stating it would harm competition and result in higher prices for consumers. And the Federal Communications Commission, which needed to give its approval to transfer T-Mobile’s wireless licenses, also opposed the merger. AT&T withdrew its application to the FCC in November. And last week it asked a federal judge to stop the legal proceedings so it could figure out if it wanted to go to trial in mid-February.
On Monday, AT&T ended its pursuit to buy T-Mobile. So there will be no trial in February. The merger is dead.
What’s likely to happen to T-mobile now?
That’s the big unanswered question. T-Mobile’s parent company Deutsche Telekom has made it clear that it’s not interested in sinking more money into the U.S. wireless market. So it’s unclear what Deutsche Telekom will do next. It could look for another buyer.
Smaller prepaid companies, Leap Wireless or MetroPCS, may be interested in buying, some if not all, of T-Mobile’s assets. There’s also talk of satellite TV provider Dish Network buying T-Mobile’s assets. The company has already been buying wireless spectrum. Anyone of these carriers could buy the company outright or they Deutsche Telekom could break up T-Mobile into smaller pieces and sell it that way.
Another scenario is that T-Mobile may partner with other companies. Even though AT&T has decided not to pursue its meger with T-Mobile, it could still form a partnership. In its press release, AT&T said that it has entered into a mutually beneficial roaming agreement. It’s unclear what that roaming arrangement entails. One possibility is that AT&T could create a joint venture with T-Mobile. This would be a separate company from AT&T, but might give AT&T more access to T-Mobile’s network.
There is also a chance that Deutsche Telekom may spin off T-Mobile as its own company in an initial public offering. The company will be getting about $3 billion in cash from AT&T as part of the break-up fee. And it will also get about $1 billion in other assets as part of the settlement.
I’m a T-Mobile customer so what does all this mean for me?
Initially, it won’t mean much. T-Mobile has still been operating as an independent company since the AT&T merger was announced in March. So in the short-term, I’d expect T-Mobile to continue to compete aggressively, especially for budget-conscious consumers.
As I explained above, it’s unclear what T-Mobile’s future will be. So I can’t say for certain whether the company will continue to operate as an independent wireless provider. That said, it will take some time to work out other deals. And then once a new deal or deals are signed and sealed, it will take time to execute those plans. This means that any major changes to T-Mobile’s network or services are still several months away.