AT&T/T-Mobile Goes Down, Solar Gets Several Boosts, and Wind Goes… Sideways?

AT&T Inc. has withdrawn its efforts to acquire T-Mobile USA, Inc. after recognizing the continuing battle with U.S. legislative agencies was likely to fail. Additionally, signs point to solar being the big winner in new forms of renewable energy as new solar farm constructions and advanced technologies are underway to increase both presence and energy-capture effectiveness. Wind, on the other hand, is not fairing as well.

Focal Points:

• AT&T has given up its quest to become the largest U.S. wireless carrier by acquiring T-Mobile in a $39 billion merger effort begun in late March of this year. Per the terms of the agreement established when negotiations began, AT&T will incur a $4 billion charge in the fourth quarter comprised of a $3 billion payout, access to spectrum in 128 cellular market areas, and a seven-year roaming agreement. The companies faced significant resistance from both the Federal Communications Commission (FCC) and Department of Justice (DOJ) and ultimately felt that mounting challenges to the bid would ultimately be insurmountable. While AT&T argued that it needed T-Mobile’s spectrum to overcome spectrum shortages, the government has contended that the combination of the two companies would result in anti-competitive harm to consumers, employees, and innovation.
• Three new renewable energy projects were approved to use federal lands by the Obama administration this week including two using solar power and one that would facilitate wind power. A 300-megawatt solar farm in AZ and a 200-megawatt solar farm in Southern CA will produce enough electricity to supply power to 90,000 homes and 65,000 homes, respectively. In the Atlantic Ocean, the government is working to encourage the construction of transmission lines that can carry power from offshore wind farms between NJ and VA. This announcement arrives one week after the company developing a wind farm off DE placed a hold on the project due to its inability to find an investment partner and Congress failed to extend production tax credits for wind farm development. Elsewhere, Google Inc. announced it will provide a $94 million equity investment to four solar farms being developed around Sacramento in projects slated to provide power to 13,000 homes.
• New solar technology developed by the National Renewable Energy Laboratory (NREL) has developed a way to get solar cells to produce more energy than they absorb. The solar cell has a "Multiple Exciton Generation" value of 114 percent, meaning it produces 14 percent more power than absorbed by the sun using new applications of gold, lead selenide, and zinc oxide. Still, many fear that even if the technology becomes inexpensive enough for mass production, unfairly low prices from Chinese producers receiving subsidies could jeopardize the technology's ability to compete. Elsewhere, the world's largest solar cell manufacturer, JA Solar Holdings Co., has improved its production capabilities for Maple multicrystalline cells such that cells can deliver 18.5 percent of the power captured – nearly two percent better than the industry average. The company lags behind SunPower Corp. which turns approximately 22.4 percent of the sun's power into electricity on average. Lastly, new technology from New Energy Technologies Inc. aims to build solar windows for energy capture using a sprayed coating delivered at room temperature and pressure.

Experton Group believes the quantity of government, competitor, and consumer backlash against the AT&T/T-Mobile merger has been significant since the start and only grew as battles with federal agencies proceeded. AT&T could have elongated the battle starting with the DOJ, and, if successful, moving to the FCC. Realistically, this would have taken close to or more than one year to complete and the chances for success were far from in its favor. Moreover, AT&T's continued argument that the merger was the only way to acquire the needed spectrum to build out its 4G network remained in question. The Telco had other opportunities to build using existing spectrum and it could always acquire from less-consequential players. IT executives should expect business-as-usual to continue for both AT&T and T-Mobile, as the former goes after other spectrum buys and the latter seeks other backers or partners to bolster its business. Dish Network Corp. may be AT&T's next acquisition as it owns "much-needed" spectrum. Enterprise customers using T-Mobile should not expect service interruptions, though the company will experience some major change in ownership and operation within the next 24 months. New solar buildouts and technology show how rapidly researchers and development capabilities are advancing to improve manufacturing and market costs in addition to energy capture. Unfortunately, the battle with China over subsidies and tariffs is sure to be prolonged and protracted. IT executives should expect consumers and utility vendors to win on pricing, and hopefully the best technologies will win, but battles drawn across country lines will likely result in further U.S. manufacturer casualties. It is unclear how many U.S. firms will be able to sustain and grow market presence given China's heavy industry involvement. IT executives should count on solar being the renewable technology that wins in the long run given application flexibility, cost effectiveness, and energy capture efficiencies. On the other hand, the U.S. has yet to build a single offshore wind farm (despite the approval of the Cape May facility in the Nantucket, MA sound) due to massive startup costs and poor comparative energy capture. Likewise, the outlook for wind farms in the Netherlands looks bleak now that the Dutch government has decided to defund the subsidy and transfer the two-thirds the costs to consumers come 2013. Currently, the government is bearing the entire 18 cents per KWh costs for the production of offshore wind power. At this rate and without any real pricing gains, solar blows wind power away.