AT&T had said it urgently needed to buy T-Mobile USA to help overcome a spectrum shortage, while Deutsche Telekom saw it as a way to exit the U.S. market to focus on its European operations. Once a cash cow, T-Mobile USA has been loosing customers.
An agreed $3 billion break up fee to be paid by AT&T, roaming agreements with AT&T and additional mobile licenses for T-Mobile USA will soften the blow but puts Deutsche Telekom back at square one.
"It was definitely a miscalculation (by AT&T)," said Steve Clement, an analyst at Pacific Crest Securities.
"I don't know that it's such a big deal to the extent that you're going to have people looking for a change of management (at AT&T). But they definitely miscalculated what they would be able to push through to regulators'" he said.
AT&T will have to look elsewhere for the wireless airwaves it has said it needs to support the high demand for mobile data services and to compete with larger rival Verizon Wireless, which has agreed to buy spectrum from cable operators.
Considering wireless outfits just got stung for "sticker shock" a couple months ago and have agreed to a "voluntary" measure to send out alerts to let people know they've gone over their plan minutes, it's not like wireless carriers have any real goodwill built up with consumers or the government right now. AT&T's muscle deal to try to obtain critical mass to squeeze out competition would have given it control of too much of the market. We need more wireless carriers, not less.
The deal's been doomed for some time now, but it's good to know it's finally finished.