Fear and loathing: Why the AT&T deal fell through

image courtesy of photos.jasondunn.com
When AT&T announced that after a nine-month fight it was throwing in the towel on its $39 billion attempt to purchase T-Mobile, the buzz was about it costing the wireless carrier $4 billion to walk away from the deal. The hidden truth was how fear killed the deal. There are several lessons to be learned for anyone making deals in business today.

For starters, this deal died because there was an "eel in the deal." In every deal, there is an eel that can seemingly come out of nowhere to do you harm. An eel is a person who is against the deal -- maybe for profit, maybe on principle, maybe because they fear they will be made to look bad if a deal goes through. They may just be a curmudgeon who doesn't want to see change. Regardless of the reason, you need to consider the eel in the deal.

In the case of the AT&T merger with T-Mobile, the eel in the deal surfaced early: It was Sprint, the nation's third largest carrier. The most vocal opponent of the deal, Sprint filed a lawsuit last September claiming the merger would create a duopoly, with AT&T and Verizon controlling over 75 percent of the wireless market.

Sprint Nextel Corp. CEO, Dan Hesse earned lots of frequent flyer miles shuttling between company HQ in Overland Park, Kan. to Washington, D.C. to testify to Congress. Lawmakers lined up on both sides of the AT&T deal, with some 100 Republican congressmen and 15 Democrats saying the Justice Department should let the merger proceed.

The federal government never exactly killed the deal, but we have to understand that the modern "no" in deal making is not a plain "no." The modern no is "yes, later." AT&T finally took the hint and bowed out after the Federal Communications Commission ordered a further administrative hearing.

Don't let fear kill your deals. In making any deal, know that there are four easy choices that are easier than doing something new:

1. Do nothing. The number one choice for most corporate managers is to do nothing. The same is true for regulators. Making a deal, or letting one go through, is risky. AT&T couldn't overcome that.

2. Stay with the incumbent. Nobody likes change. The devil you know is better than the devil you don't. But what was ignored in the AT&T deal was that change is inevitable. Deutsche Telekom is still exploring a sale or merger of T-Mobile because it does not feel that it is economically viable as a stand-alone carrier.

3. Stick with the biggest brand. Think of the old adage, "Nobody got fired for picking IBM." In this deal, letting Verizon stay number one was a safe choice for many. AT&T couldn't convince people that combining the number two and four biggest players to create the largest U.S. wireless carrier wouldn't hamper competition.

4. Go with the lowest price. Cheaper is always better, right? No, cheaper is easier. Consumer advocates made the point that T-Mobile's plans typically cost $15 to $50 per month less than comparable plans from AT&T. How can T-Mobile be cheaper? Maybe it's because they don't offer Apple iPhones and are the only major wireless carrier not building a next-generation wireless network.

All four of those choices are easier than making a deal. The task of a manager seeking to make a deal is to take the fear and loathing out of the process and show that the easy choice is not necessarily the best choice. Deal making is about overcoming the fear that results in the four easy choices. If every deal has an eel -- which, in my experience is the case -- we have to have strategies to neutralize its impact.

For more reading: AT&T ditches T-Mobile merger: So what's it mean for you?
AT&T/T-Mobile merger flopped despite governor, advocacy support

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