AT&T (T) Calls Off Bid for T-Mobile; What's Next for Either?

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For AT&T (NYSE: T), it was supposed to go like this:

• Step 1 - Acquire T-Mobile
  
  
• Step 2 - ...
  
  
• Step 3 - Profit!

But with yesterday's announcement that it was ending its trek to acquire T-Mobile from Deutsche Telekom, many investors are now asking themselves, "Now what?"

Well, here's what few analysts are taking away from the announcement:

• Goldman Sachs says the timing of the news is earlier than some might have speculated. The firm thought AT&T would fight on in order to put pressure on T-Mobile for a lower break-up fee, or to add complexity to future strategic decisions involving T-Mobile within the wireless industry.
  
  Goldman says what everyone is thinking: AT&T need spectrum. Rival Verizon (NYSE: VZ) has been buying-up spectrum from Cox Communications and SpectrumCo over the last few weeks. The biggest draw for the AT&T/T-Mobile deal, Goldman notes, was the cost-cutting potential.
  
  Moving forward, Goldman suggests that AT&T is likely to tred lightly in an effort to gain back investor confidence. The company might wait for an administration change, or work more closely with the government in future spectrum deals.
  
  What Deutsche Telekom is going to do with T-Mobile remains a mystery. At an unrealized valuation of $39 billion, suitors are limited. The U.S. DoJ decision also indicates a desire to keep a fourth wireless carrier in the U.S.
  
  
• Kaufman Bros. doesn't see AT&T pursuing another spectrum deal in the near-term either. AT&T will now be focused on completing its $2 billion spectrum acquisition from QUALCOMM (Nasdaq: QCOM).
  
  Kaufman Bros. comments: "The company can still boost capacity by accelerating its LTE deployments, which is more spectrally efficient, they have already deployed more Ethernet to their towers to increase capacity, and it still can roam on T-Mobile's network for added capacity. This is in addition to the WiFi deployments. Rather, we now believe the company may turn its attention to cost cutting and repositioning their wireline assets."
  
  Further, Kaufman Bros. doesn't think Sprint (NYSE: S) will necessarily come out ahead following the broken deal. T-Mobile, unable to land an Apple (Nasdaq: AAPL) iPhone contract and no long-term strategy in sight, might move to market its services with a new roaming agreement.
  
  AT&T could gain as much as 4 cents per share in earnings for 2012 due to lower acquisition costs, Kaufman Bros. noted.
  
  
• Wedbush said the collapse of the deal should have minimal impact on its estimates. The firm commented: "we believe AT&T must continue to build out its network to compete and provide ubiquitous broadband mobile data. While Deutsche Telekom has not yet come out with a Plan B, we expect them to look for a suitor for T-Mobile USA...We believe it likely that T-Mobile USA's portfolio of ~9,400 towers will be back on the auction block. This was rumored to have been shopped around for ~$2 billion prior to March 2011."

On a conference call Monday, Deutsche Telekom CEO Rene Obermann said it was "incomprehensible" that U.S. regulators would break-up a deal aimed at making a significant contribution to the U.S. National Broadband Plan. He said T-Mobile needs to get spectrum, which they're working on, but did not want to speculate about any "inorganic steps" or deals.

One analyst from Espirito Santo said that T-Mobile is just "crying out" for a merger with Sprint, which might be the "only long-term solution" for Deutsche Telekom.

Other options include hashing partnerships with the likes of Leap Wireless (Nasdaq: LEAP) and possible Metro PCS (NYSE: PCS), or simply divest non-core assets in order to fund U.S. operations.

AT&T is trading about 0.6 percent better Tuesday, possibly on a relief rally. Deutsche Telekom (OTCBB: DTEGY) is also up about 1.4 percent, probably because it just received a nearly $6 billion payout

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