Is AT&T Rex Fighting Off Extinction?

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AT&T's (NYSE: T  ) all-consuming ambition to acquire T-Mobile may have blinded it to the changes taking place in the mobile communications landscape. While the No. 2 wireless carrier was amassing a legion of lobbyists to lubricate the approval of its merger with No. 4 carrier T-Mobile, No. 1 carrier Verizon (NYSE: VZ  ) was building its 4G network and hammering out a wireless spectrum deal that would eclipse AT&T's proposal in impact, if not in expense.

Verizon's recent $3.6 billion arrangement with cable companies Comcast (Nasdaq: CMCSA  ) , Time Warner Cable (NYSE: TWC  ) , and Bright House Networks buys it enough spectrum to dominate AT&T in seven of the eight largest wireless markets in the country.

AT&T's $39 billion proposal so far has brought the company nothing but headaches:

  • An antitrust lawsuit brought against it by the Department of Justice.
  • A report released by the Federal Communications Commission rebutting every major claim made by AT&T.
  • A $4 billion break-up fee payable to Deutsche Telekom, T-Mobile's parent company, if the deal falls through.

Wait, what's that sound?
In the meantime, other companies -- some AT&T may not have even considered threats a year ago -- have been moving into AT&T's territory.

DISH Network (Nasdaq: DISH  ) , the satellite video company, has decided to get into the wireless biz. It plans on building a satellite/terrestrial LTE network to compete in the 4G marketplace. Microsoft (Nasdaq: MSFT  ) bought Skype to get into the wireless voice-over-Internet business. And Facebook's free instant-messaging capability is in competition for the carrier's lucrative text-messaging service.

State of the non-union
AT&T, perhaps sensing the futility of fighting both government agencies, has abruptly changed its mind about wanting an expedited trial. Last Friday, the company asked Judge Ellen S. Huvelle to continue with the planned February antitrust suit court date and not go along with a DOJ request for a postponement. But yesterday, AT&T released a statement saying both it and T-Mobile wished to postpone the proceedings to "evaluate all options ... We are actively considering whether and how to revise our current transaction to achieve the necessary regulatory approvals."

Judge Huvelle readily agreed with AT&T and the Department of Justice, canceling the February trial, and setting a Jan. 18 hearing to decide the future of the case.

Unlike Sprint Nextel (NYSE: S  ) , which vehemently opposed the AT&T/T-Mobile merger, Verizon did not speak out against it. In fact, last spring when the deal was announced, the company's reaction was surprisingly apathetic. Verizon's CEO Dan Mead even said, "I'm not concerned about it."

Verizon was indifferent, perhaps, because it was perfectly content to watch AT&T waste its resources trying to pull off a deal so audacious even its legendary lobbying army couldn't grease it through Washington.

In the end, I don't think the AT&T-Rex will fall into a tar pit and become a future petroleum product. But I do believe it will have to pull back from its ill-advised proposal and reassess what it needs to do to stay close to its main rival, the "unconcerned" Verizon.

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Fool contributor Dan Radovsky owns shares of AT&T. The Motley Fool owns shares of Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 13, 2011, at 8:44 PM, conradsands wrote:

    It must be nice to be a deep-pocketed duopolist in this economy. According to the report “Corporate Taxpayers & Corporate Tax Dodgers 2008-10,” two of the 25 companies with the largest total tax subsidies were AT&T at #2 ($14.5 billion) and Verizon at #3 ($12.3 billion). Also, there were 30 corporations that paid less than nothing in aggregate federal income taxes over the same period. These 30 companies, whose pretax U.S. profits totaled $160 billion over the three years, included Verizon. The report states the laws that allow this were not enacted in a vacuum, but rather were adopted in response to relentless corporate lobbying, threats and campaign support.

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