Liberty x AT&T Deal: A Six for a Nine
Liberty x AT&T Deal: A Six for a Nine
AT&T’s ambition made it one of the most successful telecommunications companies ever. That ambition also racked up a lot of debt.
Power outages, aging infrastructure, multiple companies taking turns deploying fiber networks, record-breaking tropical cyclones, and islands impacted by seismic events; this is the working environment of telecom companies offering services in the U.S. Virgin Islands and Puerto Rico.
Civil Antitrust Lawsuit
In November 2020, the U.S. Department of Justice filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to block the sale of AT&T’s assets in the USVI and Puerto Rico to Liberty Latin America.
The DOJ’s Antitrust Division announced the lawsuit and simultaneously filed a proposed settlement, which prosecutors said would resolve the competitive harm alleged in the department’s complaint. To close the deal, the DOJ laid out several paths for Liberty to cede:
The Columbus fiber network in the San Juan area, acquired by Liberty Latin America as part of a previous purchase.
Additional fiber assets spread across the island.
Retail fiber-based enterprise customer accounts served by Liberty Latin America, with some exceptions.
The right to install fiber optic cables on Liberty Latin America's existing infrastructure.
An option to purchase segments of AT&T's aerial fiber network.
Acquisitions & Shrinkage
In the early 2000s, AT&T aggressively expanded operations throughout the Caribbean and Latin America. The period is marked by a flurry of regional telecommunications acquisitions, including strategic retreats from AT&T in markets it viewed as low priority.
One of the biggest telecommunications deals at the turn of the millennium occurred in 2004 when Cingular Wireless won a bidding war against rivals for AT&T’s mobile business. At the time of the announcement, Cingular Wireless was the second-largest telecommunications vendor in the United States.
A release from AT&T states, “In 2005, SBC acquired AT&T Corp, creating the new AT&T, a leader in global communications for businesses. The acquisition of BellSouth in 2006 consolidated ownership of Cingular Wireless.”
The deal made the newly formed company AT&T Mobility, the largest in the United States. By 2019, Verizon would surpass AT&T as the largest global network. By the year 2020, T-Mobile’s merger with Sprint would launch the new company into the top spot.
By 2019, AT&T would own DirectTV, Time Warner, and CNN. Around the same time, the company held $201.93 billion in assets, with $188.4 billion in debt. The company’s mountain of debt would see it eying future sell-offs to improve profit margins.
The telecommunications landscape connecting the world is complex, and it (no pun intended) has layers. AT&T has bought and sold so many assets over the past three decades that listing them all would be exhausting.
You can view historical acquisitions and events at AT&T in this report published by NBC News.
Competition on All Fronts (21st Century)
Since the 1990s, a number of competitors have pinched away at AT&T’s massive market share. When Apple first announced the iPhone to the world, AT&T leveraged an exclusive partnership with the Cupertino company, lasting four years. At the time of the partnership, AT&T was the largest mobile carrier in the world.
AT&T is no longer the world’s largest telecommunications company𑁋the title now sits with T-Mobile after a successful merger with Sprint in 2020. Before 2020, Verizon held the top spot for over a decade.
After the dot-com bubble burst, AT&T saw competitors squeeze nearly every aspect of its dominance. This increased competition included lucrative mobile businesses like purchasing ringtones, SMS rates, mobile games, and, eventually, high-speed internet.
In the early 2010s, Google openly asked internet giants to improve their speeds to prepare for the next phase of cloud computing. Major companies at the time shrugged at Google’s request and continued with incremental upgrades to broadband speeds. To force investment from internet giants, the company launched Google Fiber. Fiber offered 1 gbps for around $100.
In response, AT&T invested over $140 billion in its network between 2018 and 2022. Google likely doesn’t want to capture millions of customers, but the company does want to increase global internet speeds.
Google’s global internet ambitions crawled, so Starlink’s internet array could orbit Earth. Even today, the cold war between Google and rival telecom companies remains frosty.
Aside from competition with Google’s fiber project, AT&T also had to consider threats from a potential T-Mobile and Sprint merger in 2014. The merger failed, but the partnership that sprung from the scrapped deal ultimately chipped away at AT&T and Verizon’s market cap.
After negotiations between T-Mobile and Sprint ended, both companies agreed to target AT&T and Verizon in their marketing campaigns. When regulators appeared weary about the merger, Sprint called it off, and the pair agreed to observe a truce, spearing one another from their upcoming marketing campaigns.
Sprint and T-Mobile would spend the better half of a decade strategically attacking their larger competitors, gradually chipping away at their market share and absorbing their customer base.
The 6: Climate Change, Power Outages & Politics
In 2022, the Federal Emergency Management Agency awarded AT&T four separate contracts to modernize the agency’s communications capabilities and improve its ability to deliver its mission to help people before, during, and after disasters. The combined contracts are worth $167 million.
The new contracts come after the telecom company abandoned decades of investment in the Caribbean. With AT&T pursuing more lucrative deals like FirstNet and disaster response infrastructure for the Department of Homeland Security, it could comfortably divest assets dragging down its services portfolio.
A year after two Category 5 hurricanes devastated telecom infrastructure in Puerto Rico and the USVI, AT&T reported 2018 revenue totaling $170 billion. In a 2018 earnings report, company executives said revenue grew more than 6 percent due to the Time Warner acquisition it closed months earlier.
Woven into the 2020 deal, Liberty gained a whopping 1.1 million new customers in the Caribbean alone and onboarded 1,300 former AT&T employees. Liberty would also inherit AT&T’s hard work and bad luck.
To sustain an operation of this size𑁋providing mobile network access to several islands of varying geology in different markets𑁋Liberty learned that it needed to manage a network that sometimes suffered hourly power outages, manage the logistics of fueling generators at offline towers, and retain enough staff to manage the influx in customers.
A year later, with new customers describing degraded network performance since the deal closed, Liberty closed a deal to acquire Broadband VI.
Liberty, a newcomer to USVI’s regulatory instruments, is staring down the trifecta that drove AT&T out of town: climate change, an ongoing State of Energy Emergency, and the politics of investing in next-generation infrastructure.