AT&T drops bid for T-Mobile USA

DEUTSCHE TELEKOM may be forced into a tie-up of its sub-scale US wireless unit with Sprint Nextel after a $39 billion deal with AT&T collapsed.

AT&T said on Monday it had dropped its bid for T-Mobile USA, bowing to fierce regulatory opposition and leaving both companies scrambling for alternatives.

While Deutsche Telekom is now walking away with a $6 billion break-up package, its chief executive Rene Obermann has lost a lot of time and will now have to invest in the US market or find a new way to exit the country, an option analysts regard as unlikely.

T-Mobile USA “is just crying out for a merger with Sprint. That’s the only long-term solution for Deutsche Telekom,” said Will Draper, head of telecoms research at Espirito Santo.

T-Mobile USA, a growth engine in its early days but now a run-down asset, is badly lacking in the spectrum it needs to build a network capable of handling the vast data volumes that US consumers and businesses use on smartphones.

Bleeding money and losing customers, it ranks fourth among US carriers behind AT&T, Verizon and Sprint. – (Reuters)