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Dec. 20, 2011, 10:49 a.m.

AT&T announced yesterday that they have dropped their bid to acquire T-Mobile USA and will take a $4 billion write down due to the breakdown of this deal. The US government has been against the deal from the very beginning citing competitive threats and over-consolidation of the US market if the deal had gone through making AT&T and Verizon wireless behemoths.

While the US government is justified in preventing monopolistic control in a hyper competitive US cellular market, the deal is bound to have major implications on how AT&T and T-Mobile remain competitive from a network standpoint. Verizon has recently acquired AWS spectrum from cable companies at a cost of $4 billion, while Sprint can use spectrum from Clearwire and possibly LightSquared. AT&T’s plan was to acquire T-Mobile’s AWS spectrum and combine it with its 700, 850, 1900 MHz assets. The key here is that the valuable AWS spectrum band has large chunks of 20 MHz and 10 MHz spectrum blocks ideal for high-capacity 4G mobile broadband services. Without valuable spectrum real estate it will become increasingly difficult for AT&T to compete in relation to mobile broadband speeds and capacity.

While T-Mobile USA’s future is now in the hands of the forces at Deutsche Telekom, AT&T doesn’t have too many options left on the table. They would need to fish for spectrum with prospective mobile operators like Dish Networks, or could use techniques like cell splitting, small cells, carrier Wi-Fi all of which are incremental adjustments – not necessarily the strategic trump card they were looking for in T-Mobile.​