AT&T's Deep Washington Ties No Match for Uncertain Merger Process

Early in the morning on Aug. 31, AT&T CEO Randall Stephenson appeared on CNBC, promising to bring 5,000 new jobs to the United States if his company was allowed to buy rival T-Mobile. But just hours later, Justice Department officials announced their intention to sue to block the $39 billion merger, a move that would be the beginning of the end for a deal that would have created the largest wireless carrier in the U.S. AT&T said it was “surprised and disappointed.”

That contrast between AT&T’s rosy optimism and federal officials’ uncompromising smackdowns came to mark the T-Mobile acquisition bid that officially ended on Dec 19. The failed attempt, which will cost AT&T $4 billion in breakup fees besides legal and other costs, left observers wondering how a company with the legal, lobbying, and political presence of AT&T could have seemingly misread the Washington situation so badly.

AT&T spent $16 million on lobbying from January to September, and rolled out a long string of endorsements from lawmakers in Congress, state governors, unions, and nonprofit groups. Federal agencies like the Justice Department and the FCC don’t operate in a vacuum, and lobbying efforts can put pressure on the relatively apolitical regulatory and law enforcement processes, Brunell said. But those efforts never really came into play. Nor was it particularly close. The process never made it to wrangling over merger conditions, when political clout could be more valuable. The Justice Department acted more quickly than expected, and left little room for AT&T to maneuver. When the FCC moved to block AT&T’s application to buy T-Mobile’s spectrum licenses, it was game over.