Back in 1978, when Saturday Night Live was still in its infancy, Weekend Update covered the death of Pope John Paul I in its own special way.
Occuring barely 30 days after the death of Pope Paul VI, the immediate response after reading the “breaking news” was “We did this story a month ago”. It marked Bill Murray’s first appearance as co-anchor along with Jane Curtin.
With that kind of trivia, I could end today’s blog right now and still feel highly satisfied.
But wait, if you read more…..
Ah, memories. Too bad I can’t remember where we keep the toilet paper.
With today’s news that the Department of Justice was seeking to block AT&T’s deal with Deutsche Telecom to buy T-Mobile, for a mere $39 billion, it once again seems as if we’d just done that story.
The saga of AT&T is fascinating since the break-up in the early 80’s and its subsequent reconstruction through take-over, merger, buyouts. You name it, they’ve done it. Somehow, Quest and Verizon have maintained their independence as AT&T just reconstituted itself bit by bit.
This morning, its CEO, Randall Stephenson was on CNBC hours before the DOJ announcement, which itself came minutes after President Obama’s brief announcement regarding adressing Congress on jobs and the economy.
As time passes, I find myself believing less and less in the concept of “coincidence”.
The irony of the Department of Justice announcement is that it potentially jeopardizes job repatriation which AT&T had promised, but that others had questioned.
A case of one hand giveth?
The fact that the Communication Workers of America labor union was in favor of the T-Mobile buyout makes everything curious if the net result would be a loss of jobs.
According to Stephenson, the union was in favor because they recognized the deal would bring more investment and more jobs. That’s the same union that just uncharacteristically caved in to Verizon and went back to work without an agreement.
Eric Jackson, of Forbes Magazine, actually helped finish Spehenson’s partially correct answer in response to a question I posed to him on Twitter. Amazingly, Twitter, the great creator of an egalitarian society allows anyone the opportunity to communicate with anyone else, even people of stature. How else could someone like me have ongoing discourse with Idi Amin?
As it turns out, the deal, which may or may not actually bring more jobs, does present the opportunity to increase CWA’s roster of union members by encircling T-Mobile’s work force.
No matter whose spin you choose to believe, there’s enough healthy cynicism to satisfy everyone.
So in honor of Jackson’s contribution to my knowledge data base, I wanted to put the AT&T legal saga in a perspective that we both might appreciate.
In 1974, a full seven years after the original REO Speedwagon formed, the DOJ filed an anti-trust lawsuit against AT&T. Finally in 1984, at the very height of REO Speedwagon’s popularity, the divestiture took place resulting in what were called “The Baby Bells”. The make-up of both AT&T and REO Speedwagon has varied greatly over the years representing business opportunities and creative differences, respectively.
There are lots of things in life that I don’t understand. Advancing age has afforded me the luxury of admitting that fact since I no longer care what other people think.
But Jackson really put it succinctly, in the form of a Twitter hashtag: #selfinterestaliveandwellinAmerica
He is much more pragmatic than I am, because in my cynical mode, I thought that the CWA support was due to #FearAndLoathingOfVerizon and the belief that the enemy of my enemy is my friend. From labor’s perspective, going back to work was like making a deal with the devil, but without the deal.
What really fascinates me is the talk of a $3 billion cost to AT&T if the deal doesn’t go through. Not only that, but there are reports that AT&T would also have to forfeit some spectrum to Deutsche Telecom.
If these are all true, I understand US companies being out-maneuvered by Chinese companies, hell even North Korean negotiators, but I just can’t see how they could have been bested by a European company.
I have no basis for believing that other than stereotyped notions that are deeply ingrained within.
Great. Those things I can remember.
I would probably also wonder whether my legal representatives were double agents.
When I buy a house, my contract always has the contingency that makes the sale subject to an inspection. There may even be some other escape clauses, as well, such as the presence of a counter-clockwise spin of thetoilet flush.
It seems that someone at AT&T should have considered the possibility that DOJ might take exception to the creation of an oligopoly, as the merger would shrink us down to just 3 major cell carriers (Read Eric Jackson’s Forbes article).
Seems that would have been less likely during the Bush administration when for all intents and purposes mergers were like the Wild, Wild West. But the climate is different these days.
Three billion is a pretty big leap of faith to make.
But now the fun begins.
There’s been lots of speculation about how political self interest will kick in in the hallowed halls of Congress, especially when jobs may be at risk in someone’s district. We all know that any representative would sell the interests of the nation down the river if it meant re-election.
Since AT&T said that the benefits of the deal would be increased jobs and technological innovation, the inference being that just the opposite would occur if the deal was blocked.
No one wants to see either of those events occur.
But wait a second, it’s unlikely that AT&T would hold its commitment to technology as hostage, particularly since that would be akin to suicide in a very competitive landscape, I think that has to be discounted in its entirety.
Further, the skepticism regarding increasing jobs is probably warranted, as workforce redundancy can’t be allowed. Besides, what better way to improve margins than by makes cuts in your most expensive cost center?
But for AT&T, this can end up being a win – win situation.
Faced with losing $3 billion and valuable spectrum property, AT&T could make a highly signifcant improvement to its public face by guaranteeing across the board job increases, amounting to, shall we say $3,000,000,000 for some defined period of time.
At that point, whatever objections Sprint and Verizon might have to the deal have would be laughed at as being counter to the interests of the nation. That sort of thing may go unnoticed for politicians but not for “greedy capitalist” institutions.
As far as I’m concerned, I got rid of both Verizon and AT&T a few months after the market started its recovery from its 2009 bottom. At that time I moved almost entirely into accidental high yielders, to quote Jim Cramer.
I do own some Sprint, but that doesn’t count, since I never would have purchased shares of a sub $5 stock with real money. Instead, I bought those last month with royalty payments from Option to Profit sales.
The funny thing is that when news does come out everyone looks for second and third derivative trades.
When the original deal was announced, American Tower got slammed because the consensus was that there was overlap in AT&T and T-Mobile tower contracts.
I bought AMT at the time, sold some calls and held onto shares for just a brief time as the share price quickly recovered. It was a very good trade for me and if I could get that kind of annualized ROI for a year, I could have retired 20 years ago.
Today, American Tower moved up on the news. Guess what it’s likely to do in a couple of days?
I rarely deal with put options, but this seems like a good time.
Whoever said the market discounts the future needs to redefine the time frame from the widely accepted 6 months to about 6 minutes.
But back to AT&T.
In the first iteration of the DOJ vs AT&T, it took 8 years for an agreement to be reached and then a bit more than a year to effect the break-up. By the time the Baby Bells were in ascendancy REO Speedwagon was in descendancy.
Nearly 30 years ago, when all of this was happening, technology was moving relatively slowly. Not too much happened in the 10 year period from start to finish. It’s hard to believe, but portable phones were an oddity back then. Forget cell phones as we know them. Have you seen episodes of Seinfeld recently?
But what would happen if AT&T was in another drawn out 10 year process? How would that effect its strategies or reluctance to enter into certain ventures?
What impact would a muted AT&T have on the national economy?
I don’t know the answer to any of these. In fact, if it weren’t for Eric Jackson, I’d have no clue regarding CWA’s real motives.
But this time around, as we go through a second round of DOJ action, I think we need to let AT&T move forward and prepare ourselves for the eventual third round of DOJ versus AT&T.
I’m hoping to have front row seats for the battle of 2048 and seeing how President McCain, who made his own deal with the devil, handles that one.
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