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No Merry Christmas for AT&T - US District Court Hearing on January 12th. 2012

by Sue Rudd | 12月 14, 2011

It has been a busy few weeks for AT&T.

Date

Event

Nov 25th/28th

  • AT&T-deep in talks with Leap Wireless, a second-tier but growing wireless player, to sell it a big piece of T-Mobile’s customer accounts and some of its wireless spectrum…..  AT&T hopes such a deal would placate the Justice Department …… or at least to strengthen AT&T’s hand if it goes to trial.

Nov.29th

Dec. 9th

  • US Department of Justice (DoJ) argued before U.S. District Judge Huvelle that since AT&T has pulled its merger application from the FCC, the issue is no longer pressing and there is no need to rush to trial. DoJ asked the judge to delay the trial to an unspecified date in the future.

Dec 12th

  • AT&T has until Jan 12th. to file a report with the court explaining whether it still plans to try to buy T-Mobile.
  • AT&T said that it is considering "whether and how" to proceed with the proposed merger, which needs both FCC and DoJ approval to move forward. If it presents a plan to proceed on Jan. 12th. the pre-trial process will restart on January 18th.

Dec.13th

  • U.S. District Court Judge Huvelle puts hold on Sprint, C Spire Suits and any court proceedings until Jan. 18, while AT&T weighs the future of the deal.

While many are saying the AT&T T-Mobile “deal is dead”, and AT&T has clearly irritated the FCC staff, AT&T is now finally taking a much more conciliatory attitude.

Our recent report ‘It's all about Spectrum - AT&T T-Mobile Bandwidth matched by Verizon and Sprint’ describes how Verizon and Sprint are both buying control of significant extra spectrum. However, the Verizon AWS spectrum purchase from SpectrumCo. requires FCC approval; and once it approves that deal the FCC will find it difficult to argue that a merged AT&T T-Mobile would have an excessively ‘dominant spectrum position’.

Once the FCC allows Verizon’s spectrum acquisition - and after Sprint’s takes ‘virtual control’ of Clearwire’s spectrum - AT&T will have a very strong case that its ability to compete will be diminished if it is not allowed to acquire T-Mobile.

A complete reversal of the original case.

AT&T is working hard to complete the deal and is thought to have two teams pursuing two parallel options.

Option 1. AT&T is negotiating to divest sufficient spectrum and assets to satisfy the regulators. See:

AT&T and T-Mobile: Will there be a Spectrum Fire Sale to Escape Department of Justice and Close the Deal?

See Blog: Could AT&T Settlement Catapult Leap and MetroPCS to Top National Status?

Option 2. AT&T is still preparing to fight in court.

  • Verizon’s recent actions may have significantly helped AT&T’s case.
  • If AT&T makes a new proposal on January 12th DoJ may demand that AT&T refile that proposal with FCC before it goes to trial. [Note: AT&T correctly noted that it is normal to resolve DoJ issues before getting FCC approval. We also noted that in April in: ‘AT&T T-Mobile Acquisition: How long will it take to close?’]

AT&T really…really….really… wants the T-Mobile spectrum for capacity growth and is not likely to give up easily.

But, if AT&T loses at trial there are two other likely options:

Option A. “A network-sharing deal between AT&T and T-Mobile could be established, but this would probably not allow AT&T to reuse T-Mobile's AWS spectrum for LTE. A major blow for AT&T.

Option B. Deutsche Telekom is still anxious to complete the sale as it has major European investment plans for the $39 Billion. It might decide to spin out T-Mobile to a Private Equity partnership pending a later sale to a new player like. Google. [Several options for T-Mobile’s future are summarized in AT&T and T-Mobile: Will there be a Spectrum Fire Sale to Escape Department of Justice and Close the Deal?

We should know by January 12th. 2012, if AT&T can come back with a modified proposal that may be acceptable to DoJ, and then the FCC.

Rethinking US Market Structure and Competition in an IP world.

In a recent policy paper Strategy Analytics suggested that the nature of US Mobile Broadband competition has changed and that ‘All-IP’ networks dramatically change both ‘economies of scope and scale’ and the ‘Relevant Geographic Areas’ that determine Competitive Concentration for Anti-Trust purposes.

See: Policy Insight: New Mobile Industry Structure and 'All-IP' Services change AT&T T-Mobile's 'Spectrum Dominance' and Create new 'Challengers'

There may not however, be sufficient time in the current AT&T case to make such a profound change to the traditional 1980s/90s market analysis. Nor to establish rules for the new digital ‘All-IP’ Mobile Broadband Industry.

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