AT&T (NYSE: T) has ended its quest to buy No.4 US cellular company T-Mobile for $39 billion. It will pay T-Mobile parent Deutsche Telekom a $4 billion break-up fee.
The future of AT&T Wireless will not be significantly altered by the failure. It will continue to lead the US market in share along with Verizon Wireless. The fate of T-Mobile is another matter. It only has 35 million subscribers, and many of those assumed that they would be part of the AT&T network. T-Mobile has not aggressively promoted new services and smartphones based on the assumption that it would be part of AT&T as well.
Deutsche Telekom will now be armed with $4 billion to resurrect T-Mobile. It will have to extend and improve its 4G capacity to compete with its three larger rivals. And, there is speculation that it may buy No.3 cellular carrier Sprint-Nextel (NYSE: S) which continues to struggle. Spint’s share price is down by more than half over the last year. It has 50 million subscribers.
Douglas A. McIntyre
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