Jeff Kagan: AT&T will lobby behind the scenes to get the deal
done then it will pop back on the radar and it will try again 
                           
We have seen countless successful mergers in the wireless industry over the last decade. AT&T has participated in many of them. Why then has everything seemed to change now? Why is this T-Mobile deal being met with so much pushback?
The reason is the marketplace has changed during the last several years. Let’s discuss what changed, what went wrong, why AT&T wanted T-Mobile, what it will do now and what Deutsche Telecom’s options are next.
It all started with the smart phone explosion over the last few years. AT&T Mobility led the charge and it won so many customers, so quickly, it could not keep up with the demand.
Wireless is a balancing act. Carriers need to stay just ahead of the demand curve. If they are too quick, they have to charge more to customers so they can pay their bills. If they are too slow they have bottlenecks and service problems.
After wrestling with the sudden influx of customers and wireless data demand AT&T knew it had a growing problem and needed a quick solution. It needed more spectrum. So it decided the best solution was to acquire T-Mobile. 
                              
                          
Good for the company
                          
Yesterday this deal would have been approved easily. However today the marketplace is different. AT&T’s first mistake was not realising this. I like AT&T and this acquisition would be good for the company; however it is not good for the industry.
That was not AT&T’s concern. It didn’t think it needed to be concerned with the entire industry. It had a spectrum shortage and it says this was the right solution for AT&T.
Over the last decade we have seen so many mergers. Today there are very few competitors left in the US, and they are very large. At some point regulators simply have to say no when the next deal would continue to shrink the marketplace to a level that would impact competition, innovation and pricing.
This deal was that line in the sand, and regulators said no. First the Department of Justice and now the FCC both said this deal may help AT&T, but would hurt the marketplace.
So it looks like AT&T is withdrawing its application for acquisition. However don’t be fooled into thinking that the attempt to acquire T-Mobile is over. It is just behind the scenes now, instead of on the public stage.
I have watched AT&T over the last 25 years through all its changes. Remember this AT&T is actually SBC which acquired AT&T several years ago and took the name. 
                          
                          
Second attempt
                          
We saw the same thing happen in the 1990s when SBC tried to acquire AT&T and was denied by Reed Hundt, then chairman of the FCC, who called the effort “unthinkable”. SBC withdrew the bid. We thought it was over and done. However several years later SBC made a second attempt and that time it was successful.
I have a gut feeling that we are about to see history try and repeat itself. AT&T will lobby behind the scenes to get the deal done then it will pop back on the radar and it will try again.
There is a bigger problem the industry faces which led AT&T to make this move: spectrum shortage.
Every carrier may suffer the same problems tomorrow. AT&T wants to get its hands on T-Mobile spectrum to solve its problem. However even if it do merge it will solve the problem only for a few years. Then it will be right back where it is today. Then what?
In addition the other carriers will have the same problem and there will be no solution left.
So we should be working to solve this spectrum shortage. That’s the debate we should be having right now. Instead of each carrier owning a portion of the spectrum, they should all pool their spectrum together. Then all carriers and all smartphones can access it all. When one band is full, switch to another band. Problem solved.
That is the kind of discussion we should be having right now. We must solve the growing spectrum shortage problem. This AT&T merger is like a sneeze. We should be focusing on the cold instead.
So what’s next? T-Mobile owned by Deutsche Telecom is a big winner. It gets a $3 billion break-up fee and $1 billion in spectrum from AT&T. That will allow it to build T-Mobile USA into a strong competitor.
Another possibility is T-Mobile USA could be acquired by Sprint Nextel. Remember all deals are not dead. However regulators have to weigh the benefits and hazards of each now.
Meanwhile AT&T will be working actively behind the scenes to clear the path for this deal to happen. Can it make lightning strike twice? There are multiple balls in the air so we will have to keep our eyes on them all. GTB

Jeff Kagan is a technology analyst based in Atlanta, Georgia, US
jeff@jeffkagan.com  
www.jeffkagan.com  

Further reading from Global Telecoms Business:
FCC turning against AT&T's T-Mobile buy 23 Nov 2011
AT&T plans LTE Advanced in 2013 09 Nov 2011
Sprint takes AT&T/T-Mobile deal to the courts 03 Nov 2011
AT&T's T-Mobile bid raises price concerns 10 Aug 2011
Deutsche Telekom eyes Belgacom stake 21 Jul 2011
Deutsche Telekom raises stake in OTE 18 Jul 2011
How René Obermann 'the Doberman' saved DT 22 Jun 2011