In this, the penultimate week of 2011, AT&T (NYSE: T) finally succumbed to the combined forces of the federal regulatory process and decided to drop its nine-month quest to take over the wireless world. On Monday, the company threw in the towel, took off its boxing gloves, and said no mas to the Department of Justice and the Federal Trade Commission. The AT&T-Mobile merger proposal flat-lined and the company pulled the plug.
Adding injury to insult, the merger's failure penalty requires AT&T to give T-Mobile $3 billion in cash and several billion dollars worth of spectrum. The company has already given notice that it will take a $4 billion (pre-tax) fourth-quarter charge toward those losses.
AT&T's expressed rationale for trying to make that deal was to give it more wireless spectrum. So having to give up that invaluable resource instead is a bitter disappointment, one exacerbated by the recent spectrum score made by archrival Verizon (NYSE: VZ).
Consolation prize
Perhaps the FCC felt a little remorse for the complete trashing it gave AT&T's merger application last month, because this week it approved the company's $1.9 billion spectrum purchase from Qualcom. It's a relatively small gain compared to the potential spectrum increase it would have gained from the T-Mobile deal, but every little bit will help in playing catch-up to Verizon.
What's good for the goose...
The curtain may have dropped on AT&T's regulatory soap opera, but it could just be lifting on a new episode starring Verizon and its newest best-friends-forever -- and I do mean forever. The wireless carrier's latest cronies are cable companies Comcast, Time Warner Cable, and Bright House Networks.
Verizon bought $3.6 billion worth of unused spectrum from those companies, giving it a large coverage advantage over AT&T in the largest markets. But what may interfere with Verizon's plans are the reselling provisions in the agreement. The cable companies will have the right to resell Verizon's wireless services, and Verizon will have the same rights in regard to the cable companies' voice and broadband services. This has given rise to a DOJ investigation of the proposal.
DISH may have something on its plate it doesn't want to swallow
Wednesday saw DISH Network's shares jump 9%. Why? Because of speculation that with AT&T's plans thwarted, it may come after DISH and its cache of spectrum. The T-Mobile deal had a $39 billion price tag. DISH's market cap is almost $13 billion. The math may work out, especially since DISH has not yet put together a wireless network. That may diminish any anticompetitive aspects of such a deal in the FCC's and DOJ's eyes.
And now there are four
Leap Wireless (Nasdaq: LEAP) joined the 4G LTE-generation. Leap is the parent of Cricket Wireless, which on Wednesday launched its first LTE network, this one in Tucson, Ariz. It joins major carriers AT&T and Verizon, as well as fellow second-tier carrier MetroPCS, to become the fourth wireless carrier in the U.S. to be able to claim such a network. Sprint Nextel (NYSE: S) expects to have its LTE system up and running in mid-2012.
Big fish eats small fish
Akamai (Nasdaq: AKAM) bought small Israeli start-up Cotendo this week for $268 million. Despite its size, Cotendo had been one of Akamai's largest competitors. It was also the target of a patent infringement lawsuit brought by Akamai. Juniper Networks (NYSE: JNPR) and AT&T were rumored to also have been pursuing the content delivery network and website acceleration services company.
Put on a smiley face
The last suck on the straw of this week's telecom news milkshake is the story of Samsung suing Apple (Nasdaq: AAPL) in a German court over several alleged patent infringements. One of them is a claim by Samsung that Apple ripped off its "emoticon input method for mobile terminal." In other words, Samsung wants the inputting of a smiley face on an iPhone to be verboten in Deutschland. :)
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