AT&T DROPS BID TO ACQUIRE T-MOBILE

AT&T says it is ending its $39 billion bid to buy T-Mobile USA after facing fierce government objections. AT&T's purchase of T-Mobile from Deutsche Telekom of Germany would have made it the largest cellphone company in the U.S. AT&T is currently the country's second-largest wireless carrier, while T-Mobile is the fourth-largest.
The Justice Department sued to block the merger on Aug. 31, saying it would reduce competition and lead to higher prices. Last month, the companies withdrew their application to the Federal Communications Commission after its chairman also opposed the deal.

It is unclear if AT&T will still have to pay T-Mobile the exhorbitant break up fee or not. Also in question is the rumor about AT&T and T-Mobile creating a joint venture.

LEAKED: AT&T LETTER DAMAGES AT&T CASE FOR T-MOBILE ACQUISITION

Yesterday a partially-redacted document briefly appeared on the FCC website --accidentally posted by a law firm working for AT&T on the $39 billion T-Mobile deal (somewhere there's a paralegal looking for work today). While AT&T engaged in damage control telling reporters that the document contained no new information a careful review of the doc shows that's simply not true. Data in the letter undermines AT&T's primary justification for the massive deal, while highlighting how AT&T is willing to pay a huge premium simply to reduce competition and keep T-Mobile out of Sprint's hands.

While AT&T is busy telling regulators the deal will increase network investment by $8 billion, out of the other side of their mouth AT&T has been telling investors the deal will reduce investment by $10 billion over 6 years. Based on historical averages T-Mobile would have invested $18 billion during that time frame, which means an overall reduction in investment.

For the first time the letter pegs the cost of bringing AT&T's LTE coverage from 80% to 97% at $3.8 billion -- quite a cost difference from the $39 billion price tag on the T-Mobile deal. The push for 97% coverage apparently came from AT&T marketing, who was well aware that leaving LTE investment at 80% would leave them at a competitive disadvantage to Verizon. Marketing likely didn't want a repeat of the Luke Wilson map fiasco of a few years back, when Verizon made AT&T look foolish for poor 3G coverage.

The letter also notes that AT&T's supposed decision to "not" build out LTE to 97% was cemented during the first week of January, yet public documents (pdf) indicate that at the same time AT&T was already considering buying T-Mobile, having proposed the deal to Deutsche Telekom on January 15. In the letter, AT&T tries to make it seem like the decision to hold off on that 17% LTE expansion was based on costs. Yet the fact the company was willing to shell out $39 billion one week later, combined with AT&T's track record with these kinds of tactics, suggests AT&T executives knew that 80-97% expansion promise would be a useful carrot on a stick for politicians.

The reality appears to be that AT&T is giving Deutsche Telekom $39 billion primarily to reduce market competition. That price tag eliminates T-Mobile entirely -- and makes Sprint (and by proxy new LTE partner LightSquared and current partner Clearwire) more susceptible to failure in the face of 80% AT&T/Verizon market domination.

Regardless of the motivation behind rejecting 97% LTE deployment, the letter proves AT&T's claim they need T-Mobile to improve LTE coverage from 80-97% simply isn't true. That's a huge problem for AT&T, since nearly every politician and non-profit that has voiced support for the merger did so based largely on this buildout promise. It's also a problem when it comes to the DOJ review, since proof that AT&T could complete their LTE build for far less than the cost of this deal means the deal doesn't meet the DOJ's standard for merger-specific benefits. [Broadband Reports]

HULU STRIKES CONTENT DEAL WITH FOX AND DISNEY, NBC IN TALKS

Now that Hulu's owners have apparently decided the best thing to do is sell it to someone else, long arrangements for content are needed to bring the highest price. Bloomberg is reporting that after cutting a deal with Fox a few days ago Hulu has now tentatively reached a deal with another of its owners, Disney. While both arrangements could keep the TV shows flowing, they also reportedly include provisions to increase the number of ads shown on the service. That would also put it in position to reach a similar agreement with Comcast-owned NBCUniversal, because of the media giant's FCC promise to reach similar agreements as its competitors for online content.

ITS A WOOT-OFF!

Woot.com is having a Woot-off today. For those unfamiliar with Woot, they offer one product for 24 hours. During a woot-off, the products are put up as the previous one sells out. There are some good deals to be had during the woot-off and watch for the elusive bag o'crap or flying monkey that may make an appearance.

MICROSOFT IN ACQUISITION DEAL WITH NVIDIA

Microsoft and Nvidia have an agreement in place that spells out terms relating to a possible acquisition of the graphics and mobile processor manufacturer, regulatory documents indicate.
The deal gives Microsoft the exclusive right to match any offer for 30% or more of Nvidia's outstanding shares by a third-party, according to an SEC filing reviewed by InformationWeek.

"Under the agreement, if an individual or corporation makes an offer to purchase shares equal to or greater than 30% of the outstanding shares of our common stock, Microsoft may have first and last rights of refusal to purchase the stock," Nvidia said in the filing, dated May 27.
The pact puts Redmond in a position to effectively veto attempts by any of its rivals to snap up Nvidia, which makes key components for the red-hot tablet market, which includes forthcoming Windows 8 slates.

Nvidia produces the ARM-based Tegra chip, which is widely used by a number of major mobile device manufacturers. It's employed in Google Android-based tablets and smartphones from Samsung, Motorola, and others. Microsoft itself earlier this week demonstrated Windows 8 tablets running on the new, quad-core "Kal-El" version of Tegra.

There's also been rumblings over the past couple of years that Apple views Nvidia as a possible takeover target. Apple's A5 CPU for the iPad 2 uses ARM's system-on-a-chip design, an architecture in which Nvidia has considerable expertise as Tegra also relies on ARM.

Microsoft and Nvidia negotiated their acquisition deal as part of a broader arrangement under which Microsoft licensed Nvidia graphics chips for use in the Xbox entertainment and gaming console.

LIGHTSQUARED SPRINT READY TO SIGN $20 BILLION DEAL

According to Bloomberg, LightSquared, the USD7 billion Long Term Evolution (LTE) open-access mobile network that will utilise satellite spectrum acquired by New York investment firm Harbinger Capital, is close to striking a USD20 billion deal with Sprint Nextel to share network construction costs.

The report, which cites two people familiar with the talks, indicates that the two operators are hoping to finalise terms on a 15 year contract which will allow LightSquared to roll out its network faster than expected. According to Bloomberg’s sources, who declined to be named, if the deal goes through, Sprint would initially receive as much as USD2 billion annually from LightSquared, to help pay for network equipment and construction costs. Subsequent payments would vary annually, based on the number of users on the LightSquared network and usage patterns. However, conflicting reports from Reuters indicate that the agreement with Sprint is more likely to cover an eight-year time-frame, rather than the 15 year period stated elsewhere.

The news comes just days after LightSquared reportedly held talks with AT&T regarding a deal to buy additional network capacity from the mobile carrier. Two people with knowledge of the discussions stressed that the initiative was still at a preliminary stage and may not result in a deal.

APPLE SIGNS WARNER MUSIC TO STREAMING SERVICE

Need another sign that iTunes will soon be floating your library up to the cloud? Look no further than confirmation of Apple signing Warner Music, a deal that should see the label's music available in its upcoming streaming iTunes service. This is in addition to last week's confirmation that two major labels signed on, though its unclear whether Warner is part of the pair or is, indeed, a third. That might leave only one of the major labels left unsigned -- or maybe Apple's already locked down all four but doesn't want to kiss and tell.

MICROSOFT TO PAY "BILLIONS" IN NOKIA DEAL

Nokia on Sunday hinted that Microsoft essentially won a bidding war against Google to supply software to the world’s largest handset maker and that the software giant agreed to pay “billions” of dollars for the privilege.

It also suggested that the first phones running Windows Phone software are likely to come out this year.

Stephen Elop, Nokia’s new CEO who formerly worked for Microsoft, sought to answer some of the most common questions that have come up since the company announced last week that Nokia would start using the Windows Mobile operating system. He spoke in Barcelona on Sunday, the night before the Mobile World Congress starts.

He referred to a slide that Nokia displayed last week that showed marketing and other investments flowing from Microsoft to Nokia as part of the deal. While speculation has had that number in the millions or tens of millions, it’s more than that, he said. “In fact the value transferred to Nokia is measured in Bs not Ms,” he said. He did not clarify further, such as over what period of time the investment will be made.

SPOTIFY SIGNS FIRST US DEAL WITH SONY

MediaMemo is reporting Spotify, a music streaming service popular in Europe, has signed its first music deal in the US with Sony. The terms of the deal are said to be very similar to Spotify’s European deals, which would give U.S. users access to ad-supported streaming to a computer for free or ad-free streaming to a variety of devices for a monthly fee. The deal does not mean that a U.S. launch of the Spotify service is imminent, however. The company still needs to get additional labels on board, and it has had a great deal of trouble wooing U.S. labels thus far. Theories as to why labels are so reluctant include fear of further cannibalization of CD sales and fear of upsetting Apple, the top music retailer in the country.

WHAT KILLED THE GOOGLE GROUPON DEAL?

A source close to Groupon board members said that anti-trust concerns ultimately forced Groupon to turn down Google's $6 billion offer. This source says the view on Groupon's board was that a Google-Groupon merger would draw more regulatory scrutiny than any other deal Google has ever done.

Google is currently undergoing two anti-trust investigations – one from Europe and another over the ITA deal. Google also went through severe regulatory trauma acquiring DoubleClick and AdMob. Anti-trust heat halted Google's move to take over Yahoo's search business.

Because of this view – that Google-Groupon might not be allowed to go through and that it would take months and months to find out the bad news – board members decided they would need a significant break-up fee if they were to accept Google's offer.

The source says the board wanted a break-up fee akin to the one Google gave DoubleClick. A source close to DoubleClick's executive team at the time of that merger tells us the company "got significant protection." In agreeing to acquire AdMob for $750 million, Google also agreed to a $700 million kill fee. Google balked and would not agree to it.

This made the choice easy for Groupon's board, and they walked away from the deal. There was too much risk involved to take a deal that would only pay a 3X multiple on the $2 billion run-rate Groupon started seeing in November and December. [MSNBC]