How did AT&T not expect there to be a potential violation of anti-trust law? That's the first thing I was wondering when I even heard about this merger. Agreeing to a breakup fee without an exception clause for government intervention in this case is the most ridiculous thing I've ever heard.
They were hoping to BS their way through congress. The thing is, cell phone vendors are personal, tangible aspects of people's lives. People typically* have much stronger feelings about their cell vendors than they do economic, foreign, or gasp copyright policy.
* Not that I know, I'm pulling this out of my ass, but it sounds good. Possibly even correct.
That's because neither are cell phone carriers. As long as people feel like they can jump to another service to watch their precious American Reality Dancing Survivor Fear Idol (say by ditching the wires and going satellite or vice versa), then they don't too much care about cable and entertainment companies.
Now, if NBC suddenly stopped making its programming available to anyone except Comcast cable subscribers, you'd start seeing public backlash. Until it happens, people can't fathom or choose not to acknowledge something like that happening.
> "Now, if NBC suddenly stopped making its programming available to anyone except Comcast cable subscribers"
Comcast is already playing games with NBC-competing networks in direct violation of the terms they agreed to, when the merger was rubber-stamped. (e.g. The Bloomberg TV/CNBC channel kerfuffle)
Also, most Americans have more freedom to choose a competing cell service provider than a competing cable provider. If a choice between two-to-three viable options is sufficient for them to not care about cable, why would they care about cell service being reduced to two-to-three viable options?
Also, everyone knows someone who has strong feelings against AT&T, even regulators and legislators probably have at least one friend or family member who has been screwed over by them.
AT&T is trying to paint themselves as a struggling underdog in the cut-throat and 'highly competitive' American telecom market. If you read some of the documents they've put forward you'd think they're about to go bankrupt. I wish I lived in this fictional market, maybe then there would be contractless plans and one phone line wouldn't be a ridiculous $70 a month.
It's possible that they expected the massive breakup fee to have an effect on the regulators in a way that a smaller one wouldn't. Just imagine the teary-eyed AT&T executive testifying in front of the TV cameras about how the evil government is forcing them to give $7G to a competitor.
Well, when was the last time a telecom merger got blocked?
Heck, AT&T itself has already reconstituted half of the companies created after it was broken up in the 80s (SBC, Bellsouth, Ameritech, etc). And look at what Verizon's been able to get away with.
Great question! It is for the same reason that Google agreed to a really high breakup fee with motorola. It signals its willingness to fight the lawsuit up to the cost of the breakup at the least. Therefore it signals to regulators that they won't be a pushover.
That means a lot to agencies that are severely underfunded. They would rather not even start something that will last half a decade or more, like the msft case
It's a common example in game theory of how agreeing to ridiculous terms benefits the agent
AT&T is confident enough that they agreed to a breakup fee that is roughly 7.5% of total purchase price -- this is more than double the typical 3% breakup fee on M&A deals.
Think about it this way: the way things happened with the breakup fee, they could spend USD3b paying off Congress to make this happen and still come out ahead.
