AT&T’s Deal Death Shows Stronger U.S. Antitrust Hand in Mergers
AT&T Deal Death May Signal Stronger Federal Antitrust Hand
Stephen Yang/Bloomberg
AT&T Inc. spent $16 million lobbying in the first nine months this year, more than in all of 2010 and exceeding every corporation except General Electric Co. and ConocoPhillips.
AT&T Inc. spent $16 million lobbying in the first nine months this year, more than in all of 2010 and exceeding every corporation except General Electric Co. and ConocoPhillips. Photographer: Stephen Yang/Bloomberg
Dec. 19 (Bloomberg) -- Brian Blair, an analyst at Wedge Partners Corp., talks about AT&T Inc.'s decision to abandon a $39 billion takeover bid for T-Mobile USA and Apple Inc.'s victory in a final patent-infringement ruling that bans some HTC Corp. smartphones from the U.S. Blair speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)
Dec. 19 (Bloomberg) -- Tim Horan, an analyst with Oppenheimer & Co., talks about AT&T Inc.'s decision to abandon a $39 billion takeover bid for T-Mobile USA, thwarting its ambitions to become the biggest U.S. wireless carrier. Horan speaks with Adam Johnson and Lisa Murphy on Bloomberg Television's "Street Smart." (Source: Bloomberg)
The death of AT&T Inc. (T)’s bid to buy T-Mobile USA Inc. shows that U.S. officials are giving mergers tougher scrutiny.
AT&T, the largest U.S. telephone company, said yesterday that it was ending the $39 billion deal following a lawsuit from the Justice Department and opposition from the Federal Communications Commission.
“With AT&T pulling the plug, it’s pretty clear this administration has changed the landscape on merger policy” with stricter enforcement, Paul Gallant, a Washington-based analyst with Guggenheim Partners, said in an interview.
AT&T wooed Democratic-leaning labor unions, winning support from the Communications Workers of America and the AFL-CIO. It drew letters of support filed with the FCC from groups representing cattle ranchers, songwriters, balloonists, governors and technology companies.
The approach ultimately failed because AT&T, led in Washington by Jim Cicconi, senior executive vice president, misjudged the regulatory atmosphere, Craig Aaron, president of policy group Free Press, said in an interview. Now AT&T ends up with a pretax charge of at least $4 billion to reflect cash payments and other considerations to T-Mobile owner Deutsche Telekom AG. (DTE)
“AT&T thought it could get it done simply because of its political clout,” said Aaron, whose group is based in Florence, Massachusetts. “After years and years, there didn’t seem to be such a thing as antitrust enforcement any more. But now it’s clear, for some deals, there is.”
Lobbying Proves Futile
AT&T, based in Dallas, spent $16 million lobbying in the first nine months this year, more than in all of 2010 and exceeding every corporation except General Electric Co. and ConocoPhillips, according to the Center for Responsive politics, a Washington-based research group.
AT&T’s political committee gave $1.7 million this year to federal candidates and political parties, more than any other corporate PAC except Honeywell International Inc., according to Federal Election Commission records.
“This shows that future deals can’t expect a rubber stamp,” Aaron said. “It sets an important precedent that the most egregious deals can’t be pushed through with campaign cash and the endorsement of balloon enthusiasts.”
The environment is changing as regulators also scrutinize Express Scripts Inc.’s proposed purchase of Medco Health Solutions Inc. The $29.1 billion acquisition, which would result in the largest U.S. manager of pharmacy benefits for employers, insurers and union health plans, is under review by the Federal Trade Commission. States have opened inquiries into the sale out of concern that the combined company will command too much market power.
Let Markets Work
Express Scripts, based in St. Louis, plunged 22 percent through yesterday from July 21, the day the deal was announced. Medco, based in Franklin Lakes, New Jersey, dropped 15 percent.
The political process “should allow the free markets to work so that additional spectrum is available to meet the immediate needs of the U.S. wireless industry,” Randall Stephenson, chief executive officer of AT&T, said yesterday in an e-mailed statement. “Policy makers should enact legislation to meet our nation’s longer-term spectrum needs.” He didn’t offer a specific legislative proposal in his statement.
Andrew Jay Schwartzman, policy director of Media Access Project, a Washington-based nonprofit law firm, said in an interview that AT&T mistakenly concluded that “politics could trump law.”
‘Embolden the FCC’
He added, “I hope this will embolden the FCC and Department of Justice to remain vigilant in the face of political pressure.”
AT&T’s decision is a victory for consumers, Sharis Pozen, acting assistant attorney general and the top antitrust official in the Justice Department, said in an e-mailed statement.
“Had AT&T acquired T-Mobile, consumers in the wireless marketplace would have faced higher prices and reduced innovation,” she said.
The FCC wants a competitive market that drives innovation and creates jobs, Julius Genachowski, the agency’s chairman, said in an e-mailed statement.
“This deal would have done the opposite,” Genachowski said.
To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net
To contact the editor responsible for this story: Steve Walsh at swalsh@bloomberg.net
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