T-Mobile demanded last week that the FCC deny the Verizon-Cable spectrum license transfer, apparently so Deutsche Telecom/T-Mobile could get it at a deep FCC managed-market discount.
The FCC is not Deutsche Telecom/T-Mobile’s personal do-over button that they can push and magically reset the marketplace to an earlier time more to their liking. All other players have made market-driven decisions and have to live with them, and so should Deutsche Telecom/T-Mobile. That’s the essence of free-market competition, companies move forward or backward based on their own market-driven choices. It’s not competition or a market, if those who don’t like the outcome of their own market decisions, run to government for a do over and quasi-international bail-out.
Let’s review how T-Mobile got to this point.
For years T-Mobile has been a seller of its spectrum; because its parent Deutsche Telecom has long wanted to exit the U.S. market because it requires more capital investment than they are willing or financially able to expend.
Last year Deutsche Telecom/T-Mobile negotiated the sale of all its spectrum holdings and its company to AT&T for $39b, ten times the amount Verizon negotiated to pay Cable for their AWS spectrum.
In its proposed deal with AT&T, Deutsche Telecom/T-Mobile knew there were some risks to completing the deal because it negotiated in the free marketplace a substantially-above-market break-up fee ($3b in cash) and additional spectrum from AT&T, if the merger was not approved by the government.
Deutsche Telecom/T-Mobile willingly accepted and hedged the market risk-reward inherent in that deal. After the demise of that deal, Deutsche Telecom publicly valued the spectrum it’ll receive from AT&T at $3b, which just happens to be ~75% of the amount that Verizon negotiated to pay for Cable’s AWS spectrum.
Now with the certainty of 20-20 hindsight, and with $3b in cash and $3b in spectrum from AT&T, Deutsche Telecom/T-Mobile now wants the FCC to arbitrarily intervene in the marketplace and undo a private spectrum market transaction (Verizon-Cable) by its competitors, so that Deutsche Telecom/T-Mobile could potentially buy the spectrum if the FCC were to do Deutsche Telecom/T-Mobile’s bidding.
After long wanting and needing to fully exit the U.S. wireless market, and after just getting $3b in spectrum value from AT&T, why should anyone have confidence that T-Mobile now is a real potential buyer of this already-legally-spoken-for spectrum, (or that Cable would sell it to T-Mobile) given the stark financial reality that Germany, part owner of Deutsch Telecom, still badly wants to exit the U.S. market because of the unprecedented, severe demands on its available financial capital as the banker of last resort in the European debt crisis? And why would the FCC want to not respect competitive market outcomes and the law that favors allocation of spectrum by market forces and not FCC allocation decisions?
Deutsche Telecom/T-Mobile’s gambit here is patently self-serving and not competition. In a nutshell, according to Deutsche Telecom, T-Mobile already is getting spectrum from AT&T that has roughly comparable financial value as Verizon is buying from Cable. T-Mobile now wants to bank that spectrum value and also have the FCC hit a magical do-over button that would have the FCC picking market winners and losers in the Verizon-Cable deal. That would be more in Germany’s public interest than America’s.