Trouble on the Verizon for AT&T

The cost to AT&T of its busted deal for T-Mobile is much more than the huge breakup fee. There is also the time it has lost to rival Verizon.

The deal looked risky from the start, yet AT&T had the Wall Street community focused on potential cost-cutting opportunities as well as the competitive benefits of taking out a rival. Up to the day the deal was challenged by the Justice Department, AT&T was confident it wouldn't face antitrust issues. The outcome for AT&T's investors is bad on several fronts. First there's that breakup fee. Already the largest ever paid, according to Dealogic, it may actually be slightly higher than the $4 billion cited by the company. The $1 billion "book value" of spectrum that AT&T is handing over to T-Mobile as part of the fee may have a fair market value closer to $1.3 billion based on how much Verizon paid in a recent spectrum acquisition. The bigger issue is that AT&T has fallen farther behind Verizon in terms of investing in its own network. AT&T had hoped T-Mobile's cell-phone towers and spectrum assets would be a shortcut to solving its congestion problems. Verizon, besides its better network, is at least a year ahead rolling out its next generation LTE network.