Merger aftermath: Everywhere AT&T loses, Verizon wins

Verizon Wireless (s vz)(s vod) couldn’t have asked for a better outcome to the AT&T-Mo saga. Its biggest rival not only failed to leapfrog Verizon in size but also wasted nearly a year’s worth of lobbying resources in the attempt. Where AT&T (s T) failed to pick up more 4G spectrum through a controversial merger, Verizon took the easier route toward building its 4G holdings, buying up licenses from cable companies. Most importantly, from Verizon’s perspective, the AT&T-Mo fizzled out with a whimper rather than imploding with a bang, resulting in no new regulations on the wireless industry and no FCC or federal court decisions to impede Verizon’s future consolidation ambitions.

Verizon’s official position on AT&T-Mo was that it remained unopposed to the merger as long as it imposed no new regulations or conditions on wireless operators. That was a pipe dream, and Verizon knew it. Any merger the size of the AT&T deal would surely have resulted in divestitures in multiple markets, along with restrictions on how and where AT&T could use its new spectrum. And any conditions imposed on AT&T would have applied to Verizon when and if it sought to buy a competitor or more spectrum in the future. Verizon was hoping to minimize the damage, and it got its wish. The deal never got to a vote before the Federal Communications Commission and never saw an official court date in the U.S. Department of Justice’s antitrust lawsuit.

Of course, the failure of AT&T-Mo likely means any deal of such scale is out of the question for the foreseeable future. If Verizon had any ambition on making a bid on Sprint, (s S) those hopes are now dead, though an acquisition of a MetroPCS (s PCS) or a Leap Wireless (s LEAP) might still be possible. But given Verizon’s actions in the past few weeks it’s unlikely it was ever entertaining the possibility of buying Sprint or any other operator.

This month Verizon announced its intention to buy the advanced wireless service (AWS) spectrum of the stillborn cable joint venture SpectrumCo as well as the AWS licenses held by Cox Communications. Compared to the mammoth scale of AT&T-Mo, neither spectrum purchase is bound to cause a fuss at the FCC or U.S. Department of Justice. Unlike AT&T, Verizon wouldn’t be knocking a nationwide competitor out of the market, nor would it be consolidating two large customer bases or workforces. Instead, the deals would make use of mobile broadband spectrum that has sat idle since 2006 — spectrum that AT&T most certainly would have bid on if it hadn’t been trying to close its megamerger with T-Mobile.

The irony of the situation is that those deals give Verizon a spectrum windfall well beyond anything AT&T could ever accomplish by buying T-Mobile. The SpectrumCo and Cox frequencies will give Verizon at least 40 MHz of LTE spectrum across the lower 48 states and nearly 60 MHz in major markets east of the Mississippi. In key larger markets it will have more than 70 MHz — in some cases 80 MHz — to devote to 4G. Those deals will give Verizon the strongest spectrum in the industry outside Clearwire, (s clwr) but unlike Clearwire, Verizon has the financial wherewithal to turn its potential network into a real one. Verizon just showed AT&T how consolidation is done.

Verizon doesn’t escape the AT&T-Mo ordeal entirely unscathed. The merger’s critics lumped Verizon with AT&T as part of the duopoly that dominates the U.S. wireless industry, so any acquisition attempts — including the Cox and SpectrumCo deals — are sure to face some regulatory scrutiny. But given the magnitude of the deal that AT&T just tried to force past regulators, any deal Verizon pursues, short of buying a nationwide competitor, is almost certain to fly through.

Image courtesy of Flickr user superwebdeveloper