Ma Bell Ain't Giving Up on This Baby Yet
The storm clouds are gathering quickly around AT&T (NYS: T) and its proposed merger with T-Mobile USA. U.S. Senators have attacked the $39 billion blockbuster deal. Rival Sprint-Nextel (NYS: S) fears for its life if AT&T-Mobile is allowed to form. Even the Department of Justice is getting in on the action, filing suit to stop the merger dead in its tracks.
There's as much as $7 billion of AT&T's cash, services, and wireless spectrum at stake if this deal falls through, all paid to T-Mobile. Ergo, Ma Bell plays hardball to keep the dream alive.
This week, the company did a two-step tango. On the one hand, AT&T launched a big-budget media blitz in D.C.-area newspapers. The message? Sprint and Clearwire (NAS: CLWR) have darn near a monopoly on wireless radio spectrum. AT&T is just trying to stay competitive; Sprint wants to kill the competition. And if you're buying that, I have this bridge to sell in the Utah salt flats ...
On the other hand, Bloomberg reports that AT&T has contacted several sector rivals to see if they're interested in saving the deal. Sprint, MetroPCS (NYS: PCS) , Leap Wireless International (NAS: LEAP) , CenturyLink (NYS: CTL) , and DISH Network (NAS: DISH) are all among the supposed white knights. The idea is simple: Buy some subscribers, cell towers, and/or selected spectrum licenses from us so that the post-merger behemoth doesn't look so scary to government regulators.
You've seen this before, when Comcast unloaded some media assets in order to make the NBC deal happen. It worked that time.
Sprint is a heck of an unlikely deal-healer given its vehement opposition and precarious market position. And don't forget that AT&T is actively attacking the company in that government-focused ad campaign. I'm not sure if any of the other supposed saviors are any more likely to ride in with lance and checkbook ready to do the deed.
I think this deal will live or die on its own merits and demerits. And I'm pretty sure that a merger here is in the best interests of AT&T alone. Even T-Mobile would be better off merging with Sprint instead, if German parent Deutsche Telekom really is dead-set on unloading the network. But maybe this deal is too big to fail -- we won't really know until the fat lady sings.
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