The Work

December 19, 2011 10:33 PM

AT&T's Bid for T-Mobile Is Officially Dead

Posted by Brian Baxter

What would have been a landmark merger in the U.S. telecommunications sector finally succumbed to litigation and regulatory pressure Monday, as AT&T officially abandoned its $39 billion bid for Deutsche Telekom’s T-Mobile USA unit, according to The National Law Journal's Blog of Legal Times.

Given the timing of previous twists and turns in the transaction—which has pulled in dozens of Am law 200 firms since it was announced in March—it was somehow fitting that its death came just ahead of Christmas and New Year's.

After all, the U.S. Department of Justice filed its antitrust suit seeking to block the merger shortly before Labor Day, and, in a serious blow to the tie-up's chances, the Federal Communications Commission released a voluminous staff report highly critical of the deal just before Thanksgiving.

AT&T will now pay T-Mobile parent Deutsche Telecom a $4 billion breakup fee and grant the company additional wireless rights. AT&T hinted last month that it expected to make that payment by announcing that it would take a $4 billion charge against earnings this quarter should the deal collapse.

Both Dallas-based AT&T and Bellevue, Washington–based T-Mobile employed legions of outside lawyers to try and push through the cash-and-stock deal, which would have created the largest cellular carrier in the United States. Lawyers directly involved in the ill-fated deal put its chance of success at between 60 and 70 percent, according to The New York Times.

AT&T’s team included its deal counsel from Sullivan & Cromwell, antitrust counsel Arnold & Porter and Crowell & Moring, FCC counsel Wilmer Cutler Pickering Hale and Dorr, and additional litigation and regulatory counsel from Sidley Austin and Washington, D.C.'s Kellogg, Huber, Hansen, Todd, Evans & Figel.

For its part, T-Mobile turned to Wachtell, Lipton, Rosen & Katz for deal counsel, Cleary Gottlieb Steen & Hamilton for antitrust counsel, Wiley Rein for FCC counsel, and O’Melveny & Myers for representation in the Justice Department's antitrust suit.

Lawyers at several of those firms did not immediately respond to requests for comment on whether they would lose out on legal fees potentially tied to the success of any completed merger between AT&T and T-Mobile, whose parent company will still profit despite the deal's demise. The Times reports that several Wall Street investment banks are set to lose out on some $150 million in fees as a result of the proposed merger's cancellation.

The proposed merger and its related litigation and regulatory hurdles also generated work for plenty of other firms.

Paul Hastings spun off its telecommunications practice in August into its a separate boutique, Telecommunications Law Professionals, due to potential conflicts between former practice leader Carl Northrop's representation of a company fighting the merger and other Paul Hastings lawyers' work for AT&T in unrelated litigation.

In May the FCC hired Wilson Sonsini Goodrich & Rosati antitrust partner Renata Hesse to lead the agency's review of the deal, which the regulator ultimately determined would hurt consumers. (The critical report was also a lightning rod for criticism.) In October the Justice Department hired Munger, Tolles & Olson litigation partners Glenn Pomerantz and David Dinielli to supplement its own antitrust litigation team.

Former Simpson Thacher & Bartlett partner Joseph Wayland, who left to the firm last year to become deputy assistant attorney general for antitrust, is leading the Justice Department team in the AT&T matter. Wayland succeeded last month in blocking another major transaction on antitrust grounds: H&R Block's proposed acquisition of tax preparation software provider TaxAct, according to reports by sibling publication The Am Law Litigation Daily.

Former Hogan & Hartson partner Sharis Pozen, acting assistant attorney general in charge of the Justice Department's antitrust division, and deputy attorney general and ex-Bryan Cave partner James Cole, both released statements praising the government's victory in the case after AT&T announced it wouldn't proceed with its acquisition of T-Mobile. Last week U.S. district court judge Ellen Huvelle put the government's suit on hold until next month, scheduling a status conference for January 18.

Lawyers from several other Am Law 200 firms like Latham & Watkins, Steptoe & Johnson, Bingham McCutchen, Kirkland & Ellis, Greenberg Traurig, Jenner & Block, and Patton Boggs are representing companies and special interest groups advocating both support and opposition to AT&T's proposed purchase of T-Mobile.

Sprint, the nation's third-largest wireless network, hired Skadden, Arps, Slate, Meagher & Flom and Washington, D.C.-based telecom boutique Lawler, Metzger, Keeney & Logan to advocate for its opposition to the union between its top competitors.

"This is the right decision for consumers, competition, and innovation in the wireless industry," said a statement by Sprint senior vice president for government affairs Vonya McCann. "We look forward to competing fiercely in the robust, competitive market that exists today and continuing to deliver the world class service and products that consumers have come to expect from Sprint."

This week AT&T, the nation's second-largest wireless carrier behind market leader Verizon Wireless, saw talks to sell certain assets it would acquire from T-Mobile finally collapse. AT&T released its own extensive statement on its decision to abort the transaction.

Reuben Anderson, a senior litigation partner at Phelps Dunbar, serves on AT&T's board of directors. AT&T general counsel D. Wayne Watts has been leading in-house legal efforts on the merger, with a team that includes senior executive vice president for external and legislative affairs James Cicconi, vice president of federal regulatory affairs Joan Marsh, associate general counsel for FCC and external affairs Gary Phillips, and general attorney and associate general counsel Jack Zinman, Jr.

Former Wilmer partner Manfred Balz serves as head of data privacy, legal affairs, and compliance for Deutsche Telekom. David Miller serves as chief legal officer and general counsel for the company’s T-Mobile unit.

Additional reporting by Nate Raymond.



Antitrust Roundup: FCC Moves Against AT&T/T-Mobile Deal, 11/23/11

A Big Week for Munger Tolles’s Los Angeles Litigators, 10/19/11

Two More Firms Enter Great AT&T/T-Mobile USA Antitrust Fight, 9/22/11

AT&T Adds Kellogg Huber to Fight Government's Effort to Block T-Mobile Deal, 9/9/11

Skadden Files Antitrust Suit for Sprint to Block $39 Billion AT&T/T-Mobile Deal, 9/6/11

Dozens of Am Law 100 Lawyers on Hand for DOJ’s Suit Against AT&T, 8/31/11

AT&T/T-Mobile Conflict Spurs Boutique Spin-off From Paul Hastings, 8/9/11

Sidley Austin Latest Member of AT&T’s T-Mobile USA Takeover Team, 5/24/11

DOJ, FCC Tap Skadden and Wilson Sonsini Partners for Major Posts, 5/18/11

Dealmakers of the Week: Joseph Frumkin and Eric Krautheimer of Sullivan & Cromwell, 3/25/11

Five Firms Get Call for AT&T/T-Mobile Antitrust, Regulatory Work, 3/21/11

S&C, Wachtell Lead on AT&T’s $39 Billion T-Mobile USA Acquisition, 3/20/11



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