There's no doubt that Monty Python and the Holy Grail is a comedy classic. Those who have appreciation of such things should watch it, and those who show classic films to their kids (and you know who you are) should definitely put it on their lists.
Take a minute (1:49 if you're counting) to watch this scene from early in the movie. Go ahead, we'll wait.
Now, picture AT&T as the chap hoisting the older fellow, and cast T-Mobile as the poor sod who insists, "I'm not dead." AT&T is doing everything it can to kill off poor T-Mob, even to bopping it over the head and throwing it on the cart with its other victims of the Black Death.
That's because the more AT&T can marginalize T-Mobile, the more its tenuous case to take over T-Mobile will remain on life support. Even in the face of the Justice Department taking the extraordinary step to go to court to block the takeover, AT&T isn't backing down. It never does. Instead, AT&T is pissed, and with good reason.
AT&T had every expectation that they would succeed in taking over T-Mobile. Looking at it objectively, they were right. But do they have to toss T-Mobile, Monty Python-like, into an early grave?
AT&T employed the same playbook that had bludgeoned the compliant Federal Communications Commission (FCC) into submission on open Internet issues. They spent millions of dollars on lobbyists. They ginned up letters from an unsuspecting public. They got groups normally sympathetic to Democratic causes to complain and they got lots of Democrats, many of whom received lots of campaign coin from AT&T, to object. It worked every time, and there was no reason to think it wouldn't work this time.
The Obama Justice Department had settled, negotiated or declined to pursue any number of potential antitrust cases, approving the merger of TicketMaster and Live Nation, combining ticketing and concert promotion, and allowing, with conditions, Comcast to purchase NBC and its cable properties, movie studio and TV network.
The upside was tremendous. Win and AT&T eliminates a major, pesky competitor. Lose and AT&T has to cough up some pocket money. It may be that the $6 billion break-up fee AT&T would pay to T-Mobile is historically large, but not for AT&T. Of that total, $3 billion would be in cash -- amounting to one-tenth of one quarter's revenues. Another $3 billion would be in spectrum. AT&T has lots of that around that it is not using, so that would be no big deal, either. The AT&T game plan was executed to perfection and should have worked.
Except that it didn't, and now AT&T is scrambling around for Plan B -- aka The Spaghetti Factory. True to form, the company is out there with any number of misleading story lines, and hoping one of them sticks in the minds of reporters and policymakers.
Prominent among AT&T claims is that the deal is necessary because T-Mobile has no support in its Germany hq, and is going to fail anyway, so AT&T might as well buy it. The company's captive union likes that argument because AT&T workers are unionized.
AT&T should duck out of that canard. Start with what Deutsche Telekom (DT) CEO Rene Obermann told a meeting of Wall Street analysts in January on "T-Mobile USA Investor Day." Granted, this was a meeting with Wall Street analysts, so there might be some fudging here to make the company look good. At the same time, however, there are some very simple declaratory statements that are hard to ignore, such as when Obermann said, "the market in the U.S. is one of the most attractive worldwide." At another point, Obermann said: "We are convinced that T-Mobile is a very good asset."
What makes T-Mobile a good asset? Start with 34 million customers, many of whom are rabidly loyal. Obermann told the analysts at that January session that T-Mobile had revenues of more than $16 billion for the first nine months of last year, and $4.5 billion in earnings over that time. U.S. customers have higher wireless bill each month and use more minutes than do their European counterparts. Looking at those stats, DT management was bullish on prospects for more growth. "All of those metrics are beating the European comparisons by a huge margin," Obermann said then, adding there is "a huge opportunity to generate additional revenues" in the U.S. The company has the money to build out its network from funds generated by the business, without need for borrowing.
Then T-Mobile CEO Philipp Humm noted his company build "the largest and fastest 4G network in the country," covering 200 million people and with data speeds of 21 mbps in some areas, rolling out twice that speed in other areas. He and other top officials were very excited about the 4G network.
Other T-Mobile documents also point up the importance of the U.S. affiliate to the DT firmament. In the second quarter this year, T-Mobile USA contributed a greater profit to the mother ship than did the German operation and larger than for DT's European operations. For the first half of this year, T-Mobile USA's profit is higher than all of DT's non-German operations, yet no one is talking about DT getting out of Europe. The U.S. company is still earning returns of around 25 percent in a tough economy.
There have been rumors about T-Mobile being for sale flying around for years. In 2005, there were stories, later retracted, about DT selling the company. They have kept it for at least another six years. Rumors of sales, of partitions, or partial sales and what not are an inescapable part of the business landscape.
Should it decide to keep T-Mobile, DT still has a bright future here in a competitive, but large market, where it can carve out a good nice niche for itself and make some money while having an affect on the wireless landscape.
Should DT decide to sell, there are other buyers whose purchase would not result in a consolidation of the wireless market into a virtual duopoly of about 80% for AT&T and Verizon. DT might not make as much money off of a sale to a cable company (or combination of cable companies), CenturyLink or other possible suitor, but the price would be higher than zero, which is what it is likely to get from the non-sale to AT&T.
On the other hand, it will receive a substantial boost from the break-up fees due if the deal tanks. The $3 billion in cash and $3 billion in spectrum will help the company improve its network. That $3 billion is equal to one year's capital expenditures and the additional spectrum will of course be helpful as well. Even though AT&T is trying to get out of paying the breakup money if the deal falls through, DT is insisting it will be due the money. That fight should be interesting later on.
AT&T's crocodile tears over T-Mobile's possible demise aren't to be taken seriously. AT&T simply wants to eliminate a competitor and consolidate its hold on the wireless market. When that falls apart the company will move on to the next thing.
If that line doesn't stick, the other blatant one, about which Public Knowledge President Gigi Sohn has written, is that the Justice Department is looking to settle the case. There have been stories written about possible offers AT&T may have made to DoJ, including selling off 25 percent of the new company. When Acting Assistant Attorney General Sharis Pozen made the obligatory remark during the news conference announcing the government suit to block the deal that her door is always open to talk, AT&T spun it as "DoJ Looking to Deal." If she hadn't said that, then AT&T would have said that DoJ is foreclosing it as an option, so it was the lawyerly thing to mention it.
And when U.S. District Judge Ellen Huvelle scheduled a normal case status conference, with the standard language using the word "settlement," reporters jumped on it as if a settlement were a realistic option.
This is what her order said:
MINUTE ORDER: Based on the telephone conference held with the parties on this date, it is hereby ORDERED that a status conference is set for 2 p.m. on September 21, 2011, in Courtroom 23A, before Judge Ellen S. Huvelle; and it is further ORDERED that, in lieu of a LCvR 16.3 report, the parties shall file, by September 16, 2011, a joint Proposed Scheduling Order and Case Management Plan, which will facilitate the just, speedy and inexpensive determination of all pretrial matters and the trial of this case; and it is further ORDERED that at the status conference, the parties shall be prepared to discuss the prospects for settlement. Signed by Judge Ellen S. Huvelle on September 6, 2011.
Yes, the word, "settlement" occurs, but it's not the heart of the matter. It's a procedural meeting.
And if that doesn't work, then AT&T can always call on its "friends" in Congress to send a sabre-rattling letter to the DoJ and FCC. Of course, the rattle is muted by the fact that a) the Justice Department is not under the jurisdiction of the House Energy and Commerce Committee, which sent the letter and b) the FCC hasn't acted yet. So there's not much for either agency to respond to.
No matter. AT&T is angry. But T-Mobile is still not dead, no matter how much money AT&T tries to pay to the undertakers.