Who Wins As AT&T Pulls Plug On Merger?

| About: AT&T Inc. (T)

Out Monday afternoon:

AT&T Inc. (NYSE:T) abandoned a $39 billion bid to acquire T-Mobile USA after opposition from U.S. regulators, thwarting its effort to become the country’s biggest wireless carrier.

The company will take a pretax charge of $4 billion to reflect cash payments and other considerations due to T-Mobile- owner Deutsche Telekom AG (OTCQX:DTEGF), according to a statement today from the Dallas-based company.

Who wins and loses on this?

T-Mobile wins, as the company gets the break fee. As I've previously noted, I think it was either expecting this to happen or at least hedging it, as it has been adding a massive amount of 4g tower capacity around in secondary markets -- including mine. Coverage along the I-10/I-75 path has literally doubled in 4g/3g density over the last six months. Large swaths that used to be GPRS only (~40kbps) are now screaming fast and lit with UMTS. That nice hunk of cash isn't going to hurt the company one bit, and while it will have to find its feet, the company's pricing is pretty darn good.

Sprint (NYSE:S) wins. The threat of being a "never-has-been" has just dissipated materially. Never mind that now it is a potential target, although I see that as rather unlikely. The company doesn't win so much from direct effects, but rather from the wounding of the guy on top of it, AT&T. Sprint's stock was up some 7% after the market closed on the news, how so much already got priced in is unknown. Nonetheless that's a hell of a nice move after hours, albeit on a $2.15 stock that was down 4% earlier today.

AT&T isn't going to be wounded mortally, but the money has to hurt, and now the company has to go after spectrum after Verizon (NYSE:VZ) already picked some off while AT&T were screwing around with the merger. Speaking of which, Verizon got more time to build out its LTE and acquire spectrum, both of which it did, so it already won.

Incidentally, if you're wondering what T-Mobile's "4g" performance is like with modern phones I can tell you -- it hits 10Mbps (!) regularly, and that's in a marginal service area. I've seen 20+ with a full set of bars. This is very comparable to Verizon's claimed LTE speeds in the 5-12Mbps range (and sometimes faster) and is ridiculously fast -- especially on a small-screen device. You need a newer phone to get that kind of performance (e.g. the Samsung SGS-II); older "3g" terminal gear returns a "mere" 4-5Mbps (still damned fast on a small screen!)

In any event, the game is afoot in the cellular space -- just watch those data caps and throttling, as it's pretty easy to run into it at 10Mbps!

Disclosure: No positions