Yup, that T-Mobile/MetroPCS deal is officially happening.

MetroPCS shareholders have approved the merger after T-Mobile parent Deutsche Telekom “sweetened the deal,” Reuters reports. The merger would see MetroPCS’s more than 9 million subscribers jumping over to T-Mobile’s network.

The approval doesn’t come as much of a surprise. After the feds approved the T-Mobile/MetroPCS merger in March, it was only a matter of time until MetroPCS shareholders caved.

While an influx of new subscribers is great for T-Mobile, the deal will also give T-Mobile access to wireless spectrum so it can easily expand its LTE network. T-Mobile currently expects to cover 100 million people with LTE by the middle of the year and 200 million people by year’s end.

It’s also yet another feather in T-Mobile’s cap after it just smashed U.S. carrier tradition by announcing new no-contract cellular plans. T-Mobile’s new CEO John Legere hasn’t been shy about calling out its competitors for confusing and unfair contracted plans. Now T-Mobile is offering simple plans starting at $50 a month, and it’s letting subscribers pay off the cost of new phones rather than locking them in with endless subsidized pricing.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Softbank remains unfazed by Dish’s higher competing offer to acquire Sprint — and it still expects its initial deal with Sprint to go through in a few months.

Yesterday Dish announced that it’s offering Sprint $25.5 billion to purchase Sprint, $5 billion higher than Softbank’s offer to purchase a majority interest in the carrier. Undaunted, Softbank shot back last night with a statement:

SoftBank believes that the agreed terms of our transaction with Sprint offer Sprint shareholders superior short and long term benefits to Dish’s highly conditional preliminary proposal. The SoftBank-Sprint transaction is in the advanced stages of receiving the necessary approvals, and we expect to consummate the transaction on July 1, 2013.

I suppose it would have been more surprising if Softbank said anything else. Investors were less assured in the Japanese carrier’s ability to purchase Sprint following Dish’s offer — its stock fell as much as 9.3 percent in Tokyo today, DealBook reports.

At this point, we’ll just have to wait and see what Sprint decides. With Softbank, it will have an experienced carrier as a majority stakeholder, who will also let Sprint continue to exist as an independent, publicly traded company. Dish’s deal would involve a complete merger and a big bet on the satellite TV company’s vision of offering a variety of  services to compete with cable companies.

Photo: Miki Yoshihito/Flickr

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Metro Mobile, here we come. The FCC has approved the $1.5 billion merger between MetroPCS and T-Mobile USA, which would create a more powerful fourth-place wireless carrier in the United States.

T-Mobile confirmed its intent to merge with MetroPCS back in October, with a price of about $1.5 billion. The deal will help T-Mobile allocate new resources and fight off Verizon Wireless, AT&T, and Sprint. T-Mobile is the fourth place carrier, and MetroPCS is in fifth place.

But the deal isn’t done quite yet due to regulatory approval and a vote among prospective shareholder. Now the FCC is out of the way, with chairman Julius Genachowski issuing the following statement:

With today’s approval, America’s mobile market continues to strengthen, moving toward robust competition and revitalized competitors. We are seeing billions more in network investment, while the courts have upheld key FCC decisions to accelerate broadband build-out, promote competition, and benefit consumers, including our broadband data roaming and pole attachment rules. Today’s action will benefit millions of American consumers and help the U.S maintain the global leadership in mobile it has regained in recent years.

Mobile broadband is a key engine of economic growth, with U.S. annual wireless capital investment up 40% over the last four years, the largest increase in the world, and few sectors having more potential to create jobs. In this fast-moving space, of course challenges remain, including the need to unleash even more spectrum for mobile broadband and continuing to promote competition and protect consumers. The Commission will stay focused on these vital goals.

Alongside the FCC approval, MetroPCS mailed a letter today pushing for its stockholders to approve the deal.

“After a multiyear, thorough review of MetroPCS’s options, with the assistance of independent financial and legal advisers, the MetroPCS board has unanimously concluded that the proposed combination with T-Mobile is the best strategic alternative for our stockholders,” the letter reads. “The immediate cash payment you will receive and the significant ownership interest you will hold in the combined company represent a substantial premium to MetroPCS’s standalone value.”

As long as that vote goes well, look for the merger to officially close soon.

Photo via T-Mobile

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Verizon no longer wants its wireless destiny tied to the European carrier Vodafone.

Verizon is reportedly working to take full ownership over Verizon Wireless, its joint venture with Vodafone, reports Bloomberg. Among the potential options, Verizon is apparently considering a buyout of Vodafone’s 45 percent stake (worth around $115 billion, according to analyst estimates) or a massive merger.

Judging from what Bloomberg is hearing, it doesn’t sound like the merger is very likely. Two sources say the companies discussed a potential union in December, but they ended up disagreeing on headquarters location and leadership structure. A merger would also be one of the biggest corporate takeovers ever, considering Verizon’s $130 billion market cap and Vodafone’s $120 billion.

In the end, it’s much simpler for Verizon to pay.

And with Verizon Wireless being its most profitable division, it makes sense for Verizon to want full control. It could lead to more creative subscription plans, new types of advertising, or perhaps even business ideas we haven’t even considered.

At its CES booth in January, Verizon focused heavily on the many ways it could use its wireless network outside of phones. For example, it could power video headsets for firefighters, which would help them to pull up building schematics on the fly, or it could connect solar recycling bin to alert operators when it’s full.

Vodafone’s chief executive Vittorio Colao has also been actively trying to sell off its stakes in joint operations, Bloomberg points out, so he would likely welcome Verizon’s buyout offer.

Verizon hasn’t been shy about wanting to take over its wireless division over the past few years. Verizon Wireless was born from a joint venture between Bell Atlantic (which would later become Verizon) and Vodafone in 1999. Given just how much the mobile landscape has changed since then, it simply makes sense for Verizon to want to break things off.

Photo: Eric Hauser /Flickr

Practice Fusion provides free web-based health records to doctors, and now it’s expanding to serve the general public, too. The company has just acquired 100Plus, a mobile app maker that helps regular folks track the health impacts of their behavior.

The company won’t disclose the final sum, but did tell us that the acquisition was a combination of stock and cash.

100Plus’s mobile apps use analytics to show how minor behavioral changes like drinking a glass of water in the morning or walking to work can lead to a longer and healthier life. The startup’s first app demonstrated the impact of alcohol consumption on lifespan, and it launched at the SXSW conference in March.

This is Practice Fusion’s first major acquisition, but it has ample budget given that it raised $34 million in June. The relationship appears to be longstanding — Practice Fusion’s CEO Ryan Howard is listed as 100Plus’s cofounder on Crunchbase, and he provided a small amount of funding in the company’s early days.

In a recent interview at the San Francisco headquarters, Howard revealed that Practice Fusion plans to roll out consumer health products in the coming months, so the acquisition is in line with the broader strategy.

Practice Fusion is best known for its free web-based electronic health record (EHR) for doctors, which became big business in 2009 when Congress passed the Health Information Technology for Economic and Clinical Health Act, a mandate that pushes doctors to adopt an EHR by a fixed deadline of 2015.

The 100Plus apps will likely be rebranded, and the 100Plus team will be brought into the Practice Fusion fold.

The existing apps are an impressive technical feat, but it did not gain a strong foothold with consumers (it’s a similar story to design-focused health app maker Massive Health).

According to Practice Fusion’s associate vice president of corporate development Patrick Dugan, these insights should be made available to physicians. The goal is to keep doctors informed about a patient’s health in between visits. ”100Plus was interesting for us because they make it easy for people to engage with their health on a daily basis,” he said in an interview.

Chris Hogg, CEO and cofounder of 100Plus

Through the strategic acquisition, Practice Fusion will also gain an analytics expert in the form of 100Plus CEO Chris Hogg, who will assume a new role as the vice president of data science. “We were trying to make health feel like less of a chore,” Hogg told me, adding that in his new role he’ll “create a link between the doctor and patient between visits.”

Practice Fusion is accumulating a vast store of information about the patient experience, which may prove to be a valuable revenue stream. “We have more calendars, reviews about doctors, and records of visits than anyone else,” Howard told me.

The company has about 150,000 users, including doctors, nurses, and hospital admins, which accounts for about 6 percent of the addressable market.

100Plus was founded in 2011 and raised $750,000 in funding from Founders Fund, Greylock Partners, Felicis Ventures, and Band of Angels Acorn Fund, among others.

Private company research firm Privco has ranked the top 20 merger and acquisitions of the top 20 technology VC firms of 2012, including Ancestry.com’s $1.6 billion sale to private equity firm Permira and other top tech acquisitions such as Yammer, Meebo, Instagram, and NextG networks.

The biggest 2012 private exit on the list is Ancestry.com, for $1.6 billion, while Meraki, Yammer, NextG Networks, and Nicira all passed the billion-dollar mark.

Just a little more than a week, ago, PrivCo revealed the most acquisitive companies of 2012, which included Facebook, Google, Groupon, and the still-private Twitter, which was the first time a private company had made the top 10 list.

“We had our data team pull the largest exit for each of the Top 20 tech VC firms of 2012, including company sold, date of sale, and acquisition price,” Privco CEO Sam Hamedeh told VentureBeat in an email. “Most of the deal prices below have never before been disclosed publicly, including by us.”

Here’s the data, in visual form.

Note that some exits that appear smaller are ranked higher, as they returned more capital to the venture firm that primarily backed them.

photo credit: epSos.de via photopin cc

Reports continue to mount about just how horribly HP botched its acquisition of software company Autonomy.

HP wrote off $8.8 billion in November, $5 billion of which it attributed to accounting improprieties at Autonomy. That’s after writing down $8 billion in goodwill in August, 2012. HP has repeatedly insisted that it had no knowledge of the accounting problems prior to the $11.1 billion acquisition in August, 2011.

But HP’s executives and board ignored a long list of warning signs, a well-researched report from the Mercury News explains. And once it announced the deal, HP proceeded to close it in spite of a loud outcry, both within and without the company, as described in a detailed recap of the acquisition’s high and low points in the New York Times.

“Our concern was the organic growth that Autonomy was reporting was overstated,” said Dan Mahoney, research director at CFRA, in the Merc’s report. Mahoney’s firm, which focuses on companies where it believes publicly-reported financial results don’t accurately portray what’s going on. It began researching and issuing reports on Autonomy as early as 2007.

Others joined the chorus of negativity from 2009 to 2011, as detailed in the Merc’s story:

• Paul Morland of London brokerage Peel Hunt issued a warning in August, 2009, stating that its financial reports were “wrong and misleading” and that its growth was “exaggerated.”
• James Chanos of the hedge fund Kynikos Associates shorted Autonomy in 2010, explaining in August of that year that ”the accounting was absolutely dreadful, a disaster.”
• J.P. Morgan analyst David Khan wrote critically about the company in September, 2010.
• Deutsche Bank analyst Marc Geall wrote “things are looking bad” regarding the company’s sales, in March, 2011.

Autonomy, founded by Michael Lynch in 1996, makes search software that can help identify trends latent in unstructured data, such as customer-service reports and social media. The company’s technology has widely been praised for over a decade, but it has also been dogged by allegations that it’s difficult and expensive to integrate with corporations’ existing technology infrastructures.

HP’s acquisition was meant to shore up the company’s flagging fortunes in hardware sales, adding a high-margin software business to its tepid server business, and giving it purchase in the increasingly-trendy “big data” market, in which companies seek to mine large volumes of unstructured data for insights into their customers and markets.

But many started calling the wisdom of HP’s acquisition into question as soon as the company announced its plans. Perhaps most prominent was the voice of Catherine A. Lesjak, then HP’s acting CEO and currently its chief financial officer, according to the Times report. Lesjak spoke passionately against the merger to the board, with such forcefulness that she was reportedly fearful for her job. She also canceled a scheduled appearance to defend the deal.

The merger, the Times reports, ran into trouble almost immediately. “We tried really hard to make this work,” Lynch is quoted as saying. “Instead of doing it the Autonomy way, which is to sweep problems out of the way and move full steam ahead, we got bogged down in H.P. process.”

The stock market punished HP for its planned deal almost immediately, dropping the share price precipitously and initiating a long downward slide from which it has never recovered.

HPQ data by YCharts

Before a year was out, HP was forced to admit, in May, 2012, that Autonomy’s revenues had missed expectations. And then, in November, it dropped the bomb about writing off billions in value.

Former chief executive Léo Apotheker, who lost his job just one month after sealing the Autonomy deal, also said he was stunned to learn of the problems, and Lynch has also recently claimed innocence, as well as casting doubt on HP’s claims.

Even Whitman, who was on the board at the time of the merger and since assumed the CEO’s chair, has admitted disappointment over Autonomy’s performance and regret over the merger.

Now, according to Toni Sacconaghi, a Sanford Bernstein analyst quoted by the Times, the Autonomy deal may “go down as the worst, most value-destroying deal in the history of corporate America.”

Although the deal was smaller than the previous contender, AOL’s acquisition of Time Warner in 2000, it’s arguably worse because it destroyed a larger percentage of the acquiring company’s value. AOL stock dropped almost 50 percent, from $300 billion to $159 billion, between January, 2000 and December, 2001.

But HP’s value has dropped from $61 billion at the time it announced the Autonomy acquisition to $25 billion today, a drop of almost 60 percent.

And even at a 10-year low, many analysts still think HP is too expensive.

Titanic stamp image: catwalker / Shutterstock.com

Michael Lynch, the founder of Autonomy, is publicly trading blows with HP.

HP acquired Autonomy for $11.1 billion in 2011, but wrote down $8.8 billion of that earlier this month after it discovered what it called “serious accounting improprieties” in Autonomy’s books.

“I utterly reject all allegations of impropriety,” Lynch wrote in an open letter to the board published today.

Lynch is not the only one defending his reputation. The allegations have sent everyone associated with the deal running for cover. Former HP CEO Léo Apotheker, who drove the deal, said he was “stunned” to learn there were issues.

Lynch’s letter has a string of detailed questions about how things could have gone so badly wrong, whether they were known before the acquisition, and how accounting shenanigans could have accounted for $5 billion of that $8.8 billion write-down, as HP alleges. His questions also cast doubt on HP’s management of Autonomy, post-acquisition, and suggest that he has no idea where HP’s allegations are coming from.

“I have been truly saddened by the events of the past months, and am shocked and appalled by the events of the past week,” Lynch concludes.

HP wasted no time in firing back with a brief statement of its own. In a nutshell: We’ve handed this over to the authorities, and have nothing more to say at this time.

“While Dr. Lynch is eager for a debate, we believe the legal process is the correct method in which to bring out the facts and take action on behalf of our shareholders,” said HP’s statement. “In that setting, we look forward to hearing Dr. Lynch and other former Autonomy employees answer questions under penalty of perjury.”

Both parties have everything at stake. HP, which has been flailing lately, is fighting for its life. And Lynch, while he may have a lot of cash in the bank from his successful exit, has his professional reputation on the line.

The gloves are off, folks.

A copy of HP’s letter is below, via AllThingsD, which published it earlier today.

On 20 November Hewlett-Packard (HP) issued a statement accusing unspecified members of Autonomy’s former management team of serious financial impropriety. It was shocking that HP put non-specific but highly damaging allegations into the public domain without prior notification or contact with me, as former CEO of Autonomy.

I utterly reject all allegations of impropriety.

Autonomy’s finances, during its years as a public company and including the time period in question, were handled in accordance with applicable regulations and accounting practices. Autonomy’s accounts were overseen by independent auditors Deloitte LLC, who have confirmed the application of all appropriate procedures including those dictated by the International Financial Reporting Standards used in the UK.

Having no details beyond the limited public information provided last week, and still with no further contact from you, I am writing today to ask you, the board of HP, for immediate and specific explanations for the allegations HP is making. HP should provide me with the interim report and any other documents which you say you have provided to the SEC and the SFO so that I can answer whatever is alleged, instead of the selective disclosure of non-material information via background discussions with the media.

I believe it is in the interest of all stakeholders, and the public record, for HP to respond to a number of questions:

• Many observers are stunned by HP’s claim that these allegations account for a $5 billion write down and fail to understand how HP reaches that number. Please publish the calculations used to determine the $5 billion impairment charge. Please provide a breakdown of the relative contribution for revenue, cash flow, profit and write down in relation to:

• The alleged “mischaracterization” of hardware that HP did not realize Autonomy sold, as I understand this would have no effect on annual top or bottom lines and a minor effect on gross margin within normal fluctuations and no impact on growth, assuming a steady state over the period;

• The alleged “inappropriate acceleration of revenue recognition with value-added resellers” and the “[creation of] revenue where no end-user customer existed at the time of sale”, given their normal treatment under IFRS; and

• The allegations of incorrect revenue recognition of long-term arrangements of hosted deals, again given the normal treatment under IFRS.

• In order to justify a $5 billion accounting write down, a significant amount of revenue must be involved. Please explain how such issues could possibly have gone undetected during the extensive acquisition due diligence process and HP’s financial oversight of Autonomy for a year from acquisition until October 2012 (a period during which all of the Autonomy finance reported to HP’s CFO Cathie Lesjak).

• Can HP really state that no part of the $5 billion write down was, or should be, attributed to HP’s operational and financial mismanagement of Autonomy since the acquisition?

• How many people employed by Autonomy in September 2011 have left or resigned under the management of HP?

• HP raised issues about the inclusion of hardware in Autonomy’s IDOL Product revenue, notwithstanding this being in accordance with proper IFRS accounting practice. Please confirm that Ms Whitman and other HP senior management were aware of Autonomy’s hardware sales before 2012. Did Autonomy, as part of HP, continue to sell third-party hardware of materially similar value after acquisition? Was this accounted for by HP and was this reported in the Autonomy segment of their accounts?

• Were Ms Whitman and Ms Lesjak aware that Paul Curtis (HP’s Worldwide Director of Software Revenue Recognition), KPMG and Ernst & Young undertook in December 2011 detailed studies of Autonomy’s software revenue recognition with a view to optimising for US GAAP?

• Why did HP senior management apparently wait six months to inform its shareholders of the possibility of a material event related to Autonomy?

Hewlett Packard is an iconic technology company, which was historically admired and respected all over the world. Autonomy joined forces with HP with real hopes for the future and in the belief that together there was an opportunity to make HP great again. I have been truly saddened by the events of the past months, and am shocked and appalled by the events of the past week.

I believe it is in the best interests of all parties for this situation to be resolved as quickly as possible.
I am placing this letter in the public domain in the interests of complete transparency.

And here’s a copy of HP’s full statement, which we received from an HP spokesperson today.

HP has initiated an intense internal investigation into a series of accounting improprieties,
disclosure failures and outright misrepresentations that occurred prior to HP’s acquisition
of Autonomy. We believe we have uncovered extensive evidence of a willful effort on
behalf of certain former Autonomy employees to inflate the underlying financial metrics
of the company in order to mislead investors and potential buyers.

The matter is in the hands of the authorities, including the UK Serious Fraud Office, the US
Securities and Exchange Commission’s Enforcement Division and the US Department of
Justice, and we will defer to them as to how they wish to engage with Dr. Lynch. In
addition, HP will take legal action against the parties involved at the appropriate time.

While Dr. Lynch is eager for a debate, we believe the legal process is the correct method in
which to bring out the facts and take action on behalf of our shareholders. In that setting,
we look forward to hearing Dr. Lynch and other former Autonomy employees answer
questions under penalty of perjury.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Just as we heard yesterday, Sprint confirmed this morning that it’s selling 70 percent of the company to Japan’s Softbank for $20.1 billion. The deal will help Sprint manage its debt and avoid potential bankruptcy, and it also comes as the carrier is beginning to deploy its LTE 4G network across the U.S.

As part of the deal, $12.1 billion will be paid out to Sprint’s existing stockholders, while the remaining $8 billion will be new capital for Sprint. The deal is expected to close in the middle of 2013.

Combined, Sprint and Softbank will be the world’s third-largest carrier by sales with around $32 billion in annual mobile revenue.  The companies will have around 96 million subscribers (compared to Verizon’s 111 million and AT&T’s 105 million).

“This transaction provides an excellent opportunity for SoftBank to leverage its expertise in smartphones and next-generation high speed networks, including LTE, to drive the mobile internet revolution in one of the world’s largest markets,” said Softbank chairman and chief executive Masayoshi Son in a statement today.

The road to Softbank’s majority stake will be a long one. The company will create a new U.S. subsidiary, New Sprint, which will be used to invest a $3.1 billion convertible senior bond in the existing Sprint company. That bond will eventually turn into shares of Sprint, which will then transform into a subsidiary of New Sprint. After that dance is complete, Softbank will pay out the additional $17 billion.

Sprint says the deal won’t involve any changes with its relationship with Clearwire, in which it was previously a non-voting majority stakeholder.

Sprint store photo via Consumerist’s Flickr

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Updated: T-Mobile has officially confirmed the merger, which is worth $1.5 billion. Below, find the original story, as well as a video statement from CEO John Legere.

Together, T-Mobile and MetroPCS now have 42.5 million subscribers and project $24.8 billion in revenue for 2012.

Original story: Deutsche Telekom is one step closer to acquiring MetroPCS, which it will combine with its ailing U.S. arm, T-Mobile, although the merger may end up being somewhat unusual.

Both Deutsche Telekom’s and MetroPCS’s boards have approved the deal, a source in the know tells the Wall Street Journal. Yesterday, DT admitted that that it was in talks with MetroPCS but made it clear nothing was finalized yet.

The deal could help fourth-place U.S. carrier T-Mobile to strengthen its network and stem the massive tide of subscriber losses. It could also hurt No. 3 carrier Sprint, which is pouring money into upgrading its network to LTE.

As the WSJ tells it, the combined company will still go by the “T-Mobile” name and will be led by T-Mobile chief executive John Legere (who nabbed the role a few weeks ago). The deal will be a reverse merger, the source says, which means MetroPCS will basically eat up T-Mobile and give it a publicly traded stock (bypassing the typical IPO process for private companies). DT will own around 75 percent of the new firm, but since the T-Mobile stock will be public, it could also easily sell it off over time.

According to the WSJ, DT will hold $15 billion of the combined firm’s debt and MetroPCS shareholders will receive $4 per share, or about $1.5 billion in cash.

Solar energy software companies Draker and Solar Power Technologies successfully completed a merger this week on top of closing a new $8 million round of funding.

The two companies specialize in creating software to manage solar power hardware and monitor it for efficiency and profitability. The merger will allow the companies to consolidate costs and offer customers more complete services. The new entity will operate under the Draker name.

As for the funding, Draker will use the new capital to accelerate the development of its products, boost sales and marketing efforts, and expand its operations around the world. The combined company will also maintain its existing operations in Texas, Vermont, California, and New Jersey.

Under terms of the deal, current Draker CEO Charles Curtis will assume the roll of chief executive for the combined companies. Current Solar Power Technologies CEO Ray Burgess will become the merged company’s president.

The round of funding was led by Austin Ventures, with participation from Harbor Light Capital Partners and other existing investors from both companies.

“The newly combined company brings a unique range of leadership solutions to a solar industry that is increasingly focused on capital efficiency, asset performance, and reducing operating costs,” said Clark Jernigan, partner at Austin Ventures, in a statement.

Including the new round, Austin, Tex.-based Solar Power Technologies and Burlington, Vt.-based Draker have raised a total of $18.8 million in funding to date.

Solar panels photo via worradirek /Shutterstock

Not exactly, although there was a five-week initial public offering drought for venture-capital-backed companies until late last week. Facebook’s IPO was famously bad, almost the worst in a decade. At least one of the results, among potential legal issues, was a poisoned IPO well for other startups … something VentureBeat has explored before.

That poisoned well, however, might be starting to dissipate, according to a Dow Jones report on IPOs released yesterday. Just not through public offerings of stock.

The second quarter of 2012 ended with 11 IPOs, down from 20 in the first quarter. The 11 companies raised $7.7 billion, and Silicon Valley startups accounted for almost three quarters of them.

Even though the number of IPOs was down, however, the number of technology mergers and acquisitions increased slightly in terms of numbers of deals, and significantly in terms of total dollars spent. In the second quarter, 47 mergers and acquisitions were completed. The 47 deals were valued at $5.3 billion — a 40% increase in capital raised.

Microsoft’s purchase of Yammer, which is expected to close in several months, will have the third quarter off to a good start.

The lesson of Q2 2012 for Silicon Valley startups?

If you can’t go public, get acquired.

Image credit: ShutterStock

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

T-Mobile is acting tough with its edgy new marketing campaigns, but the fourth-place U.S. wireless carrier is still in a vulnerable position after its acquisition by AT&T fell apart, and it’s losing subscribers like crazy.

So what is T-Mobile’s parent company, Deutsche Telekom, to do? Apparently, it’s considering merging T-Mobile with MetroPCS, America’s fifth-largest carrier, according to a Bloomberg report.

The deal would potentially be a stock-swap transaction, sources tell Bloomberg, that would leave Deutsche Telekom in charge of the combined company. But it seems other options are on the table for T-Mobile, including an IPO or sale of T-Mobile as it is, the sources said.

Not surprisingly, neither T-Mobile nor Deutsche Telekom are commenting on the news.

Deutsche Telekom is announcing its quarterly earnings tomorrow, and it’s projected to report a loss of 470,000 T-Mobile subscribers. That’s on top of a steady drop in subscribers over the last several quarters. After its last earnings report in February, T-Mobile announced a $4 billion “Challenger Strategy” to roll out LTE in 2013 — which seemed too little, too late for the struggling carrier.

DT would have an easier time passing a merger between T-Mobile and MetroPCS past U.S. regulators, who surprised industry watchers by squashing the $39 billion AT&T deal. As the fourth and fifth-place U.S. wireless carriers, a merger wouldn’t have the monopoly concerns that the AT&T deal did (which would have made AT&T the largest carrier in the U.S.).

Republicans in the U.S. government are seeking to limit the Federal Communication Commission’s power to oversee mergers in the tech and telecommunications arena.

The Federal Communications Commission Process Reform Act passed in the House of Representatives last night, 274-174, with only 12 Democrats voting in favor of the bill. The legislation seeks to bring more oversight to the big (and rapidly accelerating) business of communications mergers and acquisitions.

Recently, the FCC was involved in the approval of major deals such as Google’s $12.5 billion acquisition of Motorola Mobility — a combination that had many sidelines-bound watchers scratching their heads. Google carefully avoided the appearance of antitrust issues, and the FCC, which was involved primarily because Motorola Mobility owned some licenses under the commission’s jurisdiction, gave the deal the nod.

However, about a year ago, when AT&T announced its intention to acquire T-Mobile for $39 billion, the FCC was the agency that needed to decide whether or not the deal would leave the wireless industry competitive. In the end, when the FCC chair decided the merger would be bad for consumers, and the companies’ application to the FCC was killed off and withdrawn.

And then there was the Comcast-NBC merger, which the FCC approved but with some interesting stipulations about content.

The new proposed legislation does require more transparency from the FCC on merger applications and other activities, but it might impede the FCC’s ability to propose stipulations that promote the public interest — for example, the FCC’s pressuring Comcast for more diversity-friendly programming during the NBC merger.

House Democrats argued that the reform bill would effectively shut down the FCC, and some question whether the bill will pass muster with Senate Democrats. However, Democrats on Capitol Hill are making amendments to the bill as it works its way through the legislative branch.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Like an obnoxious school child that can’t help but point out when it thinks it’s right (note: this is never cute), AT&T said earlier today that T-Mobile’s massive layoffs wouldn’t have happened if the FCC allowed it to purchase the smaller carrier.

“Normally, we’d not comment on something like this,” wrote AT&T’s Jim Cicconi,  Senior Executive Vice President of External and Legislative Affairs, on the company’s public policy blog. “But I feel this is an exception for one big reason – only a few months ago AT&T promised to preserve these very same call centers and jobs if our merger was approved. We also predicted that if the merger failed, T-Mobile would be forced into major layoffs.”

Cicconi then goes on to rail against the FCC’s decision to block the $39 billion merger, saying (with a certain amount of glee), “The FCC may consider itself an expert agency on telecom, but it is not omniscient.”

The blog post is worth a read, if only for Cicconi’s glaring lack of self-awareness. It’s exactly this sort of swagger and sense of  self-entitlement that played a big role in the T-Mobile merger falling apart. From the beginning, AT&T acted like it was doing consumers a favor by gobbling up one of its biggest competitors and reducing the amount of wireless choice in the U.S. (of course, AT&T claimed it was helping the wireless market).

But then the FCC issued a report that took issue with pretty much all of the benefits AT&T claimed the merger would deliver. Notably (and particularly relevant to today’s news), the report found that the merger would cause significant job losses, even though AT&T said that it would create jobs. AT&T also claimed that it wouldn’t be able to build out its 4G LTE network without the acquisition, but the FCC found that the company would have had no issue achieving nationwide LTE coverage on its own.

Instead of addressing the issues the FCC brought up, AT&T said the report was merely a “draft” with no legal standing. The carrier never apologized for lying to consumers and regulators — so it’s particularly offensive to see it rubbing salt into T-Mobile’s wounds today.

Not surprisingly, AT&T eventually gave up on its merger plans because of the intense opposition from the FCC and the Department of Justice.

AT&T thought it could power through the merger with little effort, and it likely didn’t see the regulatory opposition coming. (Let’s not forget that the Comcast/NBC Universal merger was approved just a year ago.) Instead, it ended up paying a $4 billion breakup fee to T-Mobile parent Deutsche Telekom (in addition to spectrum and other assets).

To its credit, the FCC isn’t letting AT&T have the last word. “In a short period of time, T-Mobile has re-emerged as a vibrant competitor in the mobile marketplace,” an FCC representative told AllThingsD. “Competition benefits all wireless consumers. The bottom line is that AT&T’s proposal to acquire a major competitor was unprecedented in scope and the company’s own confidential documents showed that the merger would have resulted in significant job losses.”

VentureBeat is holding its second annual MobileSummit this April 2-3 in Sausalito, Calif. The invitation-only event will debate the five key business and technology challenges facing the mobile industry today, and participants — 180 mobile executives, investors, and policymakers — will develop concrete, actionable solutions that will shape the future of themobile industry. You can find out more at our Mobile Summit site.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

AT&T has abandoned its plans to take over T-Mobile due to too much opposition from the FCC and the Department of Justice, the company announced this afternoon.

AT&T sought to buy T-Mobile from its parent, Deutsche Telekom, for $39 billion, but lawsuits and vocal opposition from the U.S. government have been piling up. On top of an lawsuit issued by the DOJ in August, the FCC went on the record in late November by saying the merger would ultimately hurt U.S. consumers and the wireless market.

The main goal of the T-Mobile acquisition was for that company’s valuable wireless spectrum. Randall Stephenson, AT&T chairman and CEO, said in a statement that AT&T planned to keep heavily investing in wireless technology, but it urges Congress to address the issue of unused wireless spectrum.

“To meet the needs of our customers, we will continue to invest,” Stephenson said. “However, adding capacity to meet these needs will require policymakers to do two things. First, in the near term, they should allow the free markets to work so that additional spectrum is available to meet the immediate needs of the U.S. wireless industry, including expeditiously approving our acquisition of unused Qualcomm spectrum currently pending before the FCC. Second, policymakers should enact legislation to meet our nation’s longer-term spectrum needs.”

AT&T will have to pay Deutsche Telekom $4 billion because the deal fell through, but said it also plans to “enter a mutually beneficial roaming agreement with Deutsche Telekom.” In theory, that should mean AT&T and T-Mobile customers should end up better off, even though the deal was killed.

The biggest winner of a dead deal between AT&T and T-Mobile is clearly Sprint, which would have become far and away the smallest major U.S. carrier. Sprint had also sued AT&T to stop the merger. Sprint’s shares are trading up 6 percent in after-hours trading, while AT&T’s share price is nearly unchanged.

Are you glad the deal is dead?

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

T-Mobile certainly won’t be lacking in suitors if AT&T’s $39 billion acquisition falls through. Dish Network is interested in partnering with T-Mobile for a wireless network of its own, if AT&T can’t seal the deal, Dish CEO Joseph Clayton said in an interview today.

Clayton joined Dish earlier this year with the promise of upping acquisitions and creating a streaming-video competitor to Netflix. He says that the company could combine its newfound wireless spectrum — a product of its Terrestar Networks and DBSD purchases — with a wireless provider like T-Mobile to create an entirely new company, Bloomberg reports.

But even if T-Mobile gets snapped up by AT&T, Clayton says he’s considering similar partnerships with Sprint or Clearwire. He’s also interested in buying additional spectrum from AT&T and T-Mobile if federal regulators force the companies to give up assets.

However it’s put together, a Dish-backed wireless network could be interesting competition against more entrenched carriers and telecom networks. And for ailing carriers like Sprint and T-Mobile, buddying up with Dish could be a wise decision.

“We’re not interested in making money on selling our spectrum,” Clayton told Bloomberg in an interview. “We want to use it to create a national wireless network, video, voice and data. We’ve got expertise in satellite-TV, and we will in satellite broadband. The voice part, we’ll need some help with.”

But before Dish can do anything, it needs to wait for the FCC to approve the use of its new wireless spectrum. Another roadblock for Dish: T-Mobile parent Deutsche Telekom apparently isn’t even thinking of a potential deal with the satellite company, a spokesman told Bloomberg.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

The Federal Communications Commission last night released a damning 157-page report (PDF) against AT&T’s proposed $39 billion T-Mobile takeover, which concludes that the merger would ultimately hurt US consumers and the wireless market.

AT&T, not surprisingly, is none too pleased. The company objected to the release of the report, calling it merely a “draft” that doesn’t have any legal standing, reports Politico. AT&T also took issue with the fact that it didn’t get to see the report before the FCC released it to the public.

Last week, AT&T and T-Mobile parent company Deutsche Telekom withdrew their FCC application for the merger, a move that was expected to allow the companies to focus on getting the deal approved by the US Department of Justice. It’s possible that the companies also heard murmurs of this massive FCC report and hoped that if they dismissed their application the FCC wouldn’t release it to the public.

In August, the US Department of Justice sued to block the merger, a move that was supported by FCC chairman Julius Genachowski. It was at that point that AT&T likely realized its hopes were dashed for a smooth acquisition.

The FCC report takes issue with pretty much all of the benefits AT&T has claimed the merger would deliver. For example, the report found that the merger would cause significant job losses, even though AT&T said that it would create jobs. AT&T also claimed that it wouldn’t be able to build out its 4G LTE network without the acquisition, but the FCC found that the company would have had no issue achieving nationwide LTE coverage on its own.

And while AT&T has been saying for some time that the merger would lead to an increase in wireless innovation, the FCC reports that it would lead to anti-competitive effects in 99 of the biggest 100 markets in the country. The agency also didn’t buy AT&T’s claims that the merger would lower wireless prices and improve reception.

So where does this leave AT&T and Deutsche Telekom? The companies have said they will continue to pursue the merger, but it’s clearly going to be a tougher nut to crack now. AT&T is reportedly considering a deal with Leap Wireless to offload some of T-Mobile’s customers and spectrum, which could make the merger less anti-competitive in the eyes of the government.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

AT&T is hoping that a new deal with Leap Wireless will save its plans of merging with Deutsche Telekom-owned T-Mobile USA.

The deal would see Leap purchasing both T-Mobile’s customer base and most of its wireless spectrum, while AT&T would retain a smaller portion of the spectrum, according to a New York Times report yesterday.

It’s unclear exactly how an AT&T/Leap deal would divide up T-Mobile’s assets, since those details haven’t been released. But VentureBeat as previously reported, AT&T might be willing to divest as much as 40 percent of T-Mobile USA’s asset. It’s thought that a divestiture of this size could change the minds of the Department of Justice and the Federal Communications Commission — both of which have taken issue with the merger.

Leap, which owns and operates the Cricket Wireless brand is primarily in the business of prepaid wireless service. If the AT&T merger does not go through, Leap could purchase T-Mobile’s assets, as it doesn’t look like Deutsche Telekom is interested in continuing its U.S. business. Such a purchase would certainly raise Leap’s national profile, too.

AT&T and Deutsche Telekom first announced plans for AT&T to acquire T-Mobile USA for $39 billion in March 2011. T-Mobile, which is the fourth largest wireless carrier, has struggled to compete against Verizon, AT&T and Sprint. So, selling to a competitor for a large sum is an attractive option, while AT&T is interested in swallowing up T-Mobile to improve its wireless network infrastructure.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Question: What costs over $4 billion and a coveted slice of wireless spectrum? Answer: The stipulation included in AT&T’s bid to purchase rival carrier T-Mobile USA in the event the sale doesn’t go through.

Today, AT&T and current T-Mobile USA owner Deutsche Telekom announced that they are withdrawing the application for the merger, which was pending approval from the Federal Communications Commission. As a cautionary measure, AT&T has listed the $4 billion pretax charge on its Q4 2011 accountancy sheet, which includes a $3 billion payout to Deutsche Telekom, a portion of wireless spectrum valued at $1 billion and other assets. However, AT&T’s total loss could amount to $6 -$7 billion if the merger fails.

Both company’s still intend to pursue the merger, but it seems very unlikely to gain approval from government regulators.

AT&T and Deutsche Telekom first announced plans for AT&T to acquire T-Mobile USA for $39 billion in March 2011. T-Mobile, which is the fourth largest wireless carrier, has struggled to compete against Verizon, AT&T and Sprint. So, selling to a competitor for a large sum (or getting a payout if it doesn’t work out) is obviously an attractive option. AT&T, on the other hand, is interested in swallowing up T-Mobile to improve its wireless network infrastructure and eliminate competition.

Due to widespread opposition to the acquisition, it makes sense that AT&T is factoring in the $4 billion loss to its record books. In September, Attorney Generals from seven U.S. states joined the Department of Justice in filing a federal lawsuit against the merger. More recently, the FCC announced that it’s seeking a hearing on the merger before giving it approval. The deal also faces a lawsuit by third-largest wireless carrier Sprint on the grounds that it would eliminate competition.

As for withdrawing the FCC application, Reuters reports that the move is part of a strategy by both companies to refocus their efforts on gaining antitrust approval for the merger from the DOJ.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Federal Communications Commission chairman Julius Genachowski has requested a trial-like hearing for the proposed AT&T and T-Mobile merger after deciding that the deal would hurt consumers.

The FCC’s hearing would be yet another roadblock to the beleaguered telecom merger. On top of the Department of Justice seeking to block the deal, the attorneys general of seven states took legal steps to stop the merger back in mid-September. AT&T rival Sprint has also filed its own lawsuit.

Genachowski and his staff concluded that the merger would end up causing the telecommunications industry to be over-concentrated, and thus want a hearing that will make AT&T prove the deal is “in the public interest.” The hearing would be presided over by an administrative law judge who will weigh the evidence and render a judgement. After that, the FCC will make a final decision.

It might be tough for AT&T to prove the deal will work in the public’s favor. At present, there are four major carriers in the U.S., with Verizon at No. 1, AT&T at No. 2, Sprint at No. 3 and T-Mobile at No. 4. If AT&T and T-Mobile customers are combined, AT&T becomes No. 1, Verizon No. 2 and Sprint becomes far and away the smallest major carrier.

“The FCC’s action today is disappointing,” AT&T said in a statement. “It is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the U.S. economy desperately needs both. At this time, we are reviewing all options.”

Do you think the AT&T and T-Mobile merger should go through?

“If we get out of the big M&A business, we have to invest in R&D,” the chief executive of HP said Monday on her first analyst conference call.

HP is still digesting its $10 billion acquisition of Autonomy, a commercial software company, which was heavily criticized because it commanded so much of HP’s market value in exchange for a gain of about a billion dollars in revenue. That’s a small amount for a company that generates $127 billion in revenue a year. That acquisition, initiated by previous CEO Leo Apotheker, has now closed.

“No large acquisitions in 2012,” Whitman said. “Nothing the size of Autonomy, and maybe more like sub-$500 million.”

She hedged that by saying, “Software may be the one area that may move in 2012, and we may want to be there.” Whitman said HP has to be sure it fills the hole and HP doesn’t pay too much for it.

“We cannot continue to rely on acquisitions alone at HP,” she said. “It’s just the wrong thing to do. We have a lot of runway with our own internal R&D capability, if we run it right.”

Whitman made the remarks as she explained why HP’s earnings expectations for next year are a lot lower than what Wall Street expected. HP is predicting $4 a share in earnings per share, compared to previous expectations of $4.56 a share. HP is no longer providing revenue guidance because HP is now managing for profitable growth, not revenues.

Whitman said she is cautious about 2012 growth because of the macroeconomic headwinds across all major regions of the world, the flooding in Thailand that will hurt PC sales for two quarters at least, and HP’s own specific issues such as higher R&D spending. She said that HP is also hiring more salespeople than it previously did.

Whitman said that HP was surprised at the weakness in the quarter for consumers buying printing supplies and printers. The disk drive shortage is helping HP in part because those who are building their own servers — Google and Facebook — are not able to do so now because they can’t get drives. They are calling HP to get servers, since HP made strategic purchases of hard drives in early October.

“I think this is going to affect the industry dramatically because it is PCs, servers, and storage,” she said.

Whitman said she was excited about Project Moonshot, a new server design that consume 89 percent less energy, 94 percent less space, and 63 percent less space.

Toni Sacconaghi, an analyst at Sanford Bernstein, challenged Whitman and said it looked like HP was losing considerable market share in various markets. Whitman said the consumer was weak all year. She said in response that HP’s problems are a third HP’s own doing. She said that some customers thought HP was getting out of PCs and so “we did ourselves in right there,” a reference to Apotheker’s plan to spin off the PC business.

“We have to get out of the news cycle and reduce the drama here,” Whitman said.

Cathie Lesjak, chief financial officer, said that HP gained share in printers, servers, and a variety of other markets. Lesjak said that the huge services group faces a big turnaround task, and that may last years rather than quarters. HP will consider letting go of low-margin services business and investing in high-margin services.

“We are making some long term bets here because we just can’t afford to run the company for the short term,” Whitman said. “We are investing for the next decade.”

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

As AT&T continues to fight a legal battle with the Department of Justice to move forward with its ambitious T-Mobile takeover, former Vice President Al Gore expressed skepticism about the massive deal going through in its current form.

Speaking at the AsiaD conference in Hong Kong yesterday, Gore said that it’s rare for the DOJ to fight so strongly against a merger, reports This is my next.

“Well … it’s going to be reviewed,” Gore said. “My guess is that the Justice Department so rarely undertakes an initiative like the one they took against that merger. I think it’ll be hard to overturn that measure. Both companies will try to put it back together, but they’d be well advised to start looking at other strategies.”

It’s unclear what those other strategies could be, but it’s becoming increasingly evident that AT&T will have to make some concessions for the $39 billion deal. The FCC also backed the DOJ’s maneuver after remaining quiet about the takeover for months. It expressed concern that the merger will prove anti-competitive since it will reduce the number of wireless carrier choice for consumers.

Gore, who sits on Apple’s board of directors, also spoke briefly about the passing of Steve Jobs, reports AllThingsD. “There’s no one like Steve,” he said. “He’s the kind of guy that comes along once every 250 years. He was totally unique. So obviously his death is a terrible loss for the entire world. And we’ll all miss him. But his legacy lives on.”

Photo via This is my next

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Of all the people to defend AT&T’s $39 billion purchase of T-Mobile, Verizon CEO Lowell McAdam comes as one of the biggest surprises.

Speaking at a Goldman Sachs investor conference on Wednesday, McAdam said the massive deal has to occur, unless the government can better focus on giving telecoms more wireless spectrum, according to the mobile site Boy Genius Report.

“I have taken the position that the AT&T merger with T-Mobile was kind of like gravity,” he told investors. “It had to occur, because you had … T-Mobile that had the spectrum but didn’t have the capital to build it out. AT&T needed the spectrum, they didn’t have it in order to take care of their customers, and so that match had to occur.”

McAdam went on to say that he has told the FCC that blocking the merger will harm American consumers. (Verizon Wireless is co-owned by Verizon and Vodafone.) The U.S. government filed papers to block the T-Mobile deal on August 31, saying that it would “substantially” reduce competition. Sprint followed up with its own lawsuit a few days later.

AT&T reiterated Wednesday that it’s seeking a “prompt trial” for the DOJ’s suit, Bloomberg reports. “We’re seeking a prompt trial because we’re very interested in closing this transaction,” AT&T attorney Mark Hansen said. “We need to have the cloud of uncertainty removed. We’re already a month beyond where we want to be.”

It’s interesting that Verizon’s CEO would be so gung-ho about letting his biggest rival become even more powerful. It could be a hint that Verizon Wireless wants to keep the door open to acquire Sprint. McAdam can’t trash talk the T-Mobile merger now when the company may need to convince regulators in a few years that it needs to purchase Sprint.

Photo by Stuart Isett/Fortune Brainstorm TECH

Glam Media

[Update: The deal was worth $150 million, according to Bloomberg.]

Most significantly, the addition of Ning gives Glam a reach of a reported 240 million unique viewers, which makes it second only to Facebook’s over 750 million uniques. Glam reaches people with its content, produced by authors using its platform, as well as the ads it serves on pages in its network. Many of of those pages are not directly owned by Glam, but in the parlance of the advertising industry, “reach” is everything. Being able to boast that it is the second largest in overall reach gives it significant clout in being able to purchase ads. And it can now say it is the third largest “social profile” company, after Facebook and LinkedIn.

Ning was founded in 2005 by then-CEO Gina Bianchini, with backing from Marc Andreessen and others. It now has about 100,000 social networking sites, and makes money from those sites because the owners pay Ning a subscription fee to keep those networks running. Glam is interested in Ning, because it gives Glam an established “social profile” property. Glam is seeking to build out its social profile component, but realized it was going to be difficult to build organically, because the field is moving so quickly.

We’ve confirmed from a source close to the companies that the acquisition price is nowhere near the stratospheric level of $750 million, which is what Ning was valued at in 2010 when it raised its last round, and is significantly less than even $500 million, where it was valued in 2008. Ning has raised over $100 million in funding during the course of its life.

“Ning is the clear leader for creating custom social websites and communities,” said Samir Arora, Chairman and CEO of Glam Media, in a statement. “Acquiring Ning adds a natural extension to our social media platform, new distribution channels and a talented Silicon Valley team, all of which support our aim to connect brands with engaged, passionate audiences.

“With the addition of Ning, Glam Media will truly become the first next generation media company in the post-social world,” Arora added.

Ning will operate as a new business unit within Glam Media, the two companies said in an announcement. Jason Rosenthal, Ning’s CEO, will join Glam as EVP Social Media & General Manager of Ning, and will be a member of the Glam Media executive team. Additionally, Marc Andreessen will join Glam Media’s board of directors, joining Accel’s Thereisa Ranzetta and DFJ’s Tim Draper as well as Glam co-founder Fernando Ruarte, CEO Arora and Marcel Reichart of Hubert Burda Media.

[Update: Andreessen has blogged about the merger here.]

Glam now boasts it is now the sixth largest U.S. property in display advertising by volume. Ning has about 60 million uniques a month, and 100 million registered social media profiles.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Sprint on Tuesday filed a federal lawsuit seeking to block AT&T’s proposed $39 billion buyout of T-Mobile USA.

“Sprint opposes AT&T’s proposed takeover of T-Mobile,” Susan Z. Haller, Sprint litigation VP, said in a statement. “With today’s legal action, we are continuing that advocacy on behalf of consumers and competition, and expect to contribute our expertise and resources in proving that the proposed transaction is illegal.”

The suit follows a lawsuit filed last week by the U.S. government. The Justice Department argued that the merger would “substantially lessen competition” in the wireless market. The FCC also threw its weight behind the Justice Department.

Sprint has arguably been the loudest critic of the AT&T/T-Mobile deal because it would leave substantially less competition in the not-that-big U.S. mobile carrier space. Sprint CEO Dan Hesse (pictured) has said in the past that merger poses “real risks” and that Sprint would try to block it.

If the deal goes through, Sprint’s position in the market will become more marginalized. At present, there are four major carriers, with Verizon at No. 1, AT&T at No. 2, Sprint at No. 3 and T-Mobile at No. 4. If AT&T and T-Mobile customers are combined, AT&T becomes No. 1, Verizon takes second and Sprint becomes far and away the smallest major carrier.

It appears Sprint was emboldened by the Department of Justice’s lawsuit and wants to make sure AT&T and T-Mobile parent Deutsche Telekom have to jump through as many hoops as possible if it wants the merger to succeed. The government and Sprint’s lawsuits will act as major hurdles, but AT&T could still win if it is able to convince regulators that the deal will not harm consumer choices.

Update: AT&T has sent us its own statement concerning Sprint’s lawsuit. Read the full statement below:

This simply demonstrates what we’ve said all along – Sprint is more interested in protecting itself than it is in promoting competition that benefits consumers. We of course will vigorously contest this matter in court as AT&T’s merger with T-Mobile USA will: help solve our nation’s spectrum exhaust situation and improve wireless service for millions; allow AT&T to expand 4G LTE mobile broadband to another 55 million Americans, or 97% of the population; and result in billions of additional investment and tens of thousands of jobs, at a time when our nation needs them most.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

AT&T will soon present a plan to the Justice Department to save its proposed $39 billion purchase of T-Mobile, which is said to involve some major concessions on AT&T’s part, Reuters reports.

The carrier has to make clear to the U.S. government why the merger is necessary, and the concessions should help to allay antitrust fears. If the deal falls through, AT&T will owe T-Mobile parent company Deutsche Telekom some $7 billion in cash, spectrum and services as a breakup fee.

While actual details of the solution remain a mystery, the carrier is expected to promise that it will continue offering T-Mobile’s inexpensive subscription plans and devices. It may also have to sell up to 25 percent of T-Mobile’s business, including customers and airwaves, to make the merger seem like less of an antitrust concern, two anonymous sources told Reuters.

“AT&T is pretty determined that they can find a solution, and they are pretty confident,” one of the sources said.

The U.S. government threw a major wrench into AT&T’s plans on Wednesday by suing to block the merger on antitrust grounds. “AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market,” the DOJ wrote in its filing.

Reuters notes that the judge randomly selected for the hearing, U.S. District Judge Ellen Segal Huvelle in Washington D.C., is known for her speedy rulings. AT&T has asked for an expedited hearing, and a source says the case will head to court within two months.

AT&T and Deutsche Telekom have plenty of legal muscle in their corner to argue for the deal. AT&T’s lead attorney is Richard Rosen of Arnold & Porter LLP, who spearheaded Cingular’s $41 billion purchase of AT&T Wireless and was at one point head of communications at the DOJ’s antitrust division. DT has hired George Cary, an antitrust star who helped the FTC fight against Staples’ merger with Office Depot in 1997.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

FCC chairman Julius Genachowski is throwing his agency’s weight behind the Department of Justice antitrust lawsuit against AT&T over its proposed merger with T-Mobile.

“By filing suit today, the Department of Justice has concluded that AT&T’s acquisition of T-Mobile would substantially lessen competition in violation of the antitrust laws,” Genachowski wrote. This marks the first time that the FCC has actively spoken against the $39 billion merger.

Genachowski continues:

Competition is an essential component of the FCC’s statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition. Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile. Competition fosters consumer benefits, including more choices, better service and lower prices.

Many have argued that AT&T would wield too much power in the US mobile industry if it buys T-Mobile, since it would only leave three major US carriers together with Verizon and Sprint. Now it appears that the FCC is taking those complaints seriously.

Sprint, one of the biggest critics of the deal, sounded unsurprisingly elated in its response to the antitrust suit. Senior vice president of government affairs Vonya B. McCann issued the following statement on behalf of Sprint:

The DOJ today delivered a decisive victory for consumers, competition and our country. By filing suit to block AT&T’s proposed takeover of T-Mobile, the DOJ has put consumers’ interests first. Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision – one which will ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry. Contrary to AT&T’s assertions, today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

The U.S. government has just filed papers to block AT&T’s proposed $39 billion purchase of T-Mobile, Bloomberg reports.

The Justice Department argues that the merger would “substantially lessen competition” in the wireless market, according to the filing. The DOJ goes on to say: “AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market.”

If the deal falls through, AT&T would have to pay T-Mobile’s parent company, Deutsche Telekom, a massive $3 billion breakup fee in cash. The company would also owe DT an additional $3 to $4 billion in spectrum and services, bringing its total payout if the deal falls through to as much as $7 billion.

Ironically, AT&T just this morning pledged that the deal would bring 5,000 jobs to America. AT&T previously said that the merger would be beneficial to consumers since it would allow the company to more easily deploy its LTE 4G network across the country.

It’s hard to be surprised by the suit. We’ve argued previously that this deal will test antitrust law. Microsoft, Facebook and several VC firms have filed letters in support of the merger.

The news is also a win for Sprint CEO Dan Hesse, who has been doing his damndest to block the merger. Hesse previously said the merger will give AT&T and Verizon a stranglehold on the cellular market in America. “The industry just won’t be as innovative and as dynamic as it has been,” he said. “It’ll gum up the works when everything has to go through these two big tollbooths, one that’s called AT&T and one that’s called Verizon.”

The deal isn’t dead yet though. The government’s suit will certainly serve as a major hurdle, but it’s possible that AT&T will be able to convince regulators that its T-Mobile merger will ultimately be helpful to consumers.

Update: AT&T has issued a response to the suit:

We are surprised and disappointed by today’s action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated.

We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed. The DOJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court.

At the end of the day, we believe facts will guide any final decision and the facts are clear. This merger will:

• Help solve our nation’s spectrum exhaust situation and improve wireless service for millions.
• Allow AT&T to expand 4G LTE mobile broadband to another 55 million Americans, or 97% of the population;
• Result in billions of additional investment and tens of thousands of jobs, at a time when our nation needs them most.

We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Sprint CEO Dan Hesse has been railing loudly against AT&T’s $39 billion purchase of T-Mobile since the deal was announced. Now we have a closer look at Hesse’s concerted effort to kill the deal, thanks to a Bloomberg report.

The CEO has taken to planning against the merger in a secure White Room, which only he has access to. His “nukes” — or tactics to shoot down the merger — are marked down in red, blue and green ink on the dry-erase boards that line three walls of the room. If you think this sounds like a war room, you’re likely not far off. Sprint’s very future depends on scuttling the T-Mobile merger. That much has become abundantly clear to Hesse over the last few months.

“Clearly, purely, we want to win and block the merger,” Hesse told Bloomberg at the company’s headquarters in Overland Park, Kansas. “This one poses real risks.”

The big problem, according to Hesse, is that the merger will give AT&T and Verizon a stranglehold on the cellular market in America. “The industry just won’t be as innovative and as dynamic as it has been,” he said. “It’ll gum up the works when everything has to go through these two big tollbooths, one that’s called AT&T and one that’s called Verizon.”

If the AT&T and T-Mobile merger meets regulatory approval, Sprint will have a hard time competing against the combined company and Verizon when it comes to pricing and snagging the hottest new phones. AT&T, of course, argues that the merger will benefit consumers since it will be able to provide better service. Others like Microsoft, Facebook and certain VC firms have also written letters to the FCC supporting the merger.

Hesse has spent considerable effort over the last few months trying to keep the merger from going through, according to the Bloomberg report: “He tripled the amount of time he’s spending on government affairs, testifying before Congress and making regular trips to Washington. Sprint is organizing industry opposition and filed a 377-page dissent with the Federal Communications Commission. The company even tapped its own engineers to show AT&T how to get more capacity from its wireless network so it wouldn’t need to buy T-Mobile.”

Additionally, Hesse is trying to get other technology CEOs and state regulators on his side and has some other, secret tactics he has yet to reveal. The company is being outspent by AT&T in Washington by more than 12-to-1, so Hesse needs regulator support to pick up the slack. Sprint’s political action committee contributed just $257,500 on federal candidates in 2009 and 2010, AT&T on the other hand contributed $3.26 million, according to the Center for Responsive Politics.

Sprint was already in trouble even before the AT&T/T-Mobile merger was proposed. The carrier has some 50 million contract customers, about half the numbers AT&T and Verizon have individually. It’s also been losing contract customers consistently in 14 of the last 15 quarters. The company hasn’t seen a profit since the third quarter of 2007.

Should the merger go through, Sprint likely won’t last very long on its own. At that point, it could get snapped up by Verizon, although that raises even greater regulatory concerns. Perhaps federal regulators will take that possible future into account when it’s weighing the AT&T/T-Mobile deal — but there’s little chance of that happening. It would be difficult to argue that Verizon would definitely end up buying Sprint if the T-Mobile merger occurs.

Right now, it seems more likely that the T-Mobile purchase will be approved. By this time next year, Sprint will likely be facing some tough questions about its future.