AT&T Rethinks T-Mobile Deal

AT&T threw in the towel on its planned US$39 billion T-Mobile merger over the holiday weekend. On Thursday, it posted a blog entry saying the deal was off. The announcement came two days after Federal Communications Commission Chairman Julius Genachowski said he would oppose the deal. This is the first time the FCC has moved to block a deal since 2002. The Department of Justice also filed a suit to block it in August.

In the Thursday announcement, AT&T also stated it would take a $4 billion charge in the 4th quarter to reflect the potential breakup fees due to Deutsche Telekom, T-Mobile’s owner.

Yet AT&T may peel off a chuck of T-Mobile assets in a manner that is less disturbing to the feds. The blog noted that AT&T will pursue wireless asset sales with Deutsche Telekom.

In an odd twist on the noisy turns in this saga, AT&T responded in a Nov. 25 blog post to reports that the “FCC must approve this withdrawal.”

Apparently those reports pushed AT&T’s buttons. While it didn’t identify their origin, the company gave a testy response, noting that “we have every right to withdraw our merger from the FCC, and the FCC has no right to stop us.”

The Hen Outsmarts the Fox

AT&T’s tactical switch may allow it to slip past the FCC’s regulatory jurisdiction.

“If other competitors buy portions of T-Mobile’s assets in different markets, then AT&T may not be violating any antitrust laws, as the FCC and DoJ allege,” Peter S. Vogel, partner in Gardere Wynne Sewell, told the E-Commerce Times. “Based on the plan that AT&T is offering now, AT&T will only purchase 40 percent of T-Mobile’s assets, and other major players will acquire the remainder.”

Under these circumstances, the FCC “really can’t complain about antitrust monopoly control by AT&T,” Vogel said.

Another avenue AT&T could take would be to prove its case in court. The problem with that approach is that the process could mire the two companies in a long-term legal back and forth.

“AT&T could litigate the purchase of T-Mobile, which will be expensive, time-consuming, and unpredictable,” said Vogel. “This asset purchase may be just the solution to allow AT&T to move ahead more quickly.”

A Weak Tactic?

While an assets sale may move the merger off the FCC’s radar, it also may weaken the logic of the original deal. In the end, AT&T could miss the real benefits of a full acquisition.

“If they trim down the size of the assets enough, then that would probably help it go through — but if they go down that path, they’ll naturally have the problem that synergies will decrease as well,” Aapo Markkanen, senior analyst for consumer mobility at ABI Research (UK), told the E-Commerce Times.

“Besides, forced asset sales tend to favor buyers quite a bit,” Markkanen noted.

“I think AT&T wants scale with this merger,” said N. Venkat Venkatraman, a management professor and antitrust expert at the Boston University School of Management.

“Scale allows them to justify the investments they need to guarantee coverage as they migrate to LTE,” he told the E-Commerce Times. “Verizon has the scale, and AT&T without T-Mobile is weaker.”

The FCC sees this merger as creating a two-horse race in mobile service, said Venkatraman, noting that the FCC has discounted Sprint’s ability to be a credible third competitor.

“I think selling some assets could be acceptable to FCC if and only if the FCC believes that those assets — either alone or in combination with Sprint — could create a credible third national competitor. That is a big IF,” he suggested.

“It is confusing to me that FCC has taken this long to decide on this announcement,” Venkatraman noted. “I am not sure that the way forward is easy for this merger.”

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Intuit’s $12B Mailchimp Purchase Breathes New Life Into Email Marketing

Intuit on Monday announced an agreement to acquire Mailchimp, a global customer engagement and marketing platform for small and mid-market businesses, for $12 billion in cash and stock advances. The purchase could be the linchpin that thrusts the mostly financial software company into solving more fertile mid-market business challenges for its customers.

The planned acquisition is part of Intuit’s mission to become an AI-driven expert platform. With the acquisition of Mailchimp, Intuit will accelerate two of its previously-shared strategic big bets: to become the center of small business growth and to disrupt the small business mid-market, said the company in its announcement.

Intuit’s acquisition of Mailchimp sends a great message to all entrepreneurs around the globe that venture capital is not always necessary, observed Michael Kawula, co-founder of CBA, a marketing agency for YouTube monetization. Mailchimp is a bootstrapped success story that has not raised any outside venture capital.

“This is a very clever growth strategy for Intuit, who wants to get in front of SMBs, which is difficult and expensive. Similar to HubSpot’s recent purchase of The Hustle newsletter, a much smaller acquisition, this also is brilliant,” he told the E-Commerce Times.

The acquisition marks a significant impact in industry, according to Osiris Parikh, sales marketing manager at Lilius. He also sees the deal as another reminder that email marketing is not dead — and data is power.

“Intuit has made a strong move to broaden its portfolio and become a leader in catering to the needs of SMBs. It is also a great story of success during Covid-19,” he told the E-Commerce Times.

Deal Basics

Intuit provides a global technology platform that makes TurboTax, QuickBooks, Mint, and Credit Karma. Intuit and Mailchimp will offer an innovative, end-to-end customer growth platform that allows customers to get their business online. It will also enable them to manage marketing, customer relationships, payment processes, and access insights and analytics, along with optimizing their cash flow and staying compliant with experts at their fingertips, according to Intuit.

Key to this process is Intuit’s ability to enable businesses to combine their customer data from Mailchimp and QuickBooks’ purchase data to get the actionable insights they need to grow and run their businesses with confidence.

“We’re focused on powering prosperity around the world for consumers and small businesses. Together, Mailchimp and QuickBooks will help solve small and mid-market businesses’ biggest barriers to growth, getting and retaining customers,” said Sasan Goodarzi, CEO of Intuit.

Mailchimp brings to Intuit technology at scale along with global customer reach.

Founded in Atlanta, in 2001, Mailchimp began by offering email marketing solutions. The company evolved into offering customer engagement and marketing automation processes fueled by an AI-driven technology stack. Mailchimp’s data and technology spans 70 billion contacts and more than 250 rich partner integrations. Its AI-powered automation at scale fuels 2.2 million daily predictions.

“Over the past two decades, we have vastly expanded and evolved Mailchimp’s platform to help millions of small businesses around the world start and grow,” said Ben Chestnut, CEO and co-founder of Mailchimp.

Why Mailchimp’s Worth It

While the email marketing sector is pretty crowded, Mailchimp stands out in terms of size and scope. The company reportedly has 13 million total global users, 2.4 million active monthly users, and 800,000 paid customers, noted Charles King, principal analyst at Pund-IT.

“Plus, half of its customers are outside of the U.S. Additionally, while people tend to focus on the mass/might of large enterprises, small businesses are really the heart and soul of most economies,” he told the E-Commerce Times.

The acquisition likely represents a lucrative opportunity for Intuit to integrate Mailchimp data with QuickBooks and provide greater analytical capabilities to customers. The synthesis of financial and marketing data in this case provides valuable and actionable insights about an organization’s clients, added Lilus’ Parikh.

“It’s also a great diversification of offerings to centralize SMB operations through one platform and benefit from Mailchimp’s established user base,” he said.

Another supporting factor for Intuit’s interest in Mailchimp is the renewed stature of email, according to Elice Max, co-owner of EMUCoupon and someone who has been involved in online marketing for eight years.

“Email marketing has made a comeback in recent years. With increased digitization caused by the pandemic, all digital mediums including email have gained a renewed importance,” she told the E-Commerce Times.

Email Marketing’s Resurgence

Technology giants are looking to build more integrated and holistic solutions. Microsoft recently bought Clipchamp, a video production tool. Both companies are looking to build platforms for the new tech-savvy SMBs, Max Suggested.

“More than anything, it means a renewed confidence in the field. Experts have been talking about the death of email marketing for a while now. But a $12 billion acquisition by a big player like Intuit means email promotion is alive and kicking,” she said.

Another factor is Intuit keeping its eye on the ball. It is important to remember the significance of Mailchimp as the pioneer in marketing automation and email marketing in particular.

“Intuit is looking to make a statement that it wants to become more than a financial software company,” Max observed.

QuickBooks Synergies

One of the motivations that lies behind Intuit’s purchase of Mailchimp is its desire to lead a revolution in the CRM capabilities of SMBs, according to Will Ward, CEO of Translation Equipment HQ . Think about the effect the pandemic has had on the popularity of remote work and the amount of remote SMBs being established.

“You would expect there to be a lot of growth potential here in the next few years. With Mailchimp and QuickBooks, Intuit is providing an end-to-end customer growth platform, and with around $20 billion invested already its belief in SMBs is evident,” Ward told the E-Commerce Times.

Like any other system that handles transactions such as orders and payments, you need to work closer to the actual customer channels. With the Intuit e-commerce product, launched about a year ago, this seems like a natural step by adding marketing automation and reaching out with its e-commerce offering to the MailChimp customer base, suggested Johan Liljeros, general manager and senior commerce advisor, North America for Avensia.

“The acquisition has added synergies between the platforms while still being able to operate as independent platforms. Looking at Intuit’s offerings, it appears they are moving towards expanding [into] digital transactional experience,” he told the E-Commerce Times.

Final Thoughts

Email marketers should be ready for disruption along with other business services providers. Intuit has been both savvy and aggressive in the way it built its business, effectively becoming the 800-pound gorilla of small business accounting and tax solutions, according to Pund-IT’s King.

“With that kind of ally behind Mailchimp, life is going to become a whole lot more ‘interesting’ for other email marketers,” he predicted.

The Intuit-Mailchimp deal should offer Intuit customers significant benefits, such as new solutions and services for bolstering their businesses. At the same time, the deal highlights the fact that old technologies can continue to be vital and dynamic.

“For years, many have claimed that email is dead or dying and quickly being replaced by whatever the tech du jour happens to be. Mailchimp — and now Intuit — beg to differ,” King quipped.

Jack M. Germain

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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