Market Overview

Did Goldman Sachs Perpetrate the Largest Financial Conspiracy Ever?


As AT&T (NYSE: T) struggled to receive regulatory approval, the highly publicized AT&T, T-Mobile merger fell through. Now that the company has been forced to call off the merger and pay a mandatory $6 billion break-up fee, T-Mobile is up for grabs. Deutsche Telekom is now considering other strategic options for T-Mobile. Given the government's monopoly concerns, would the next logical option be merging with Sprint (NYSE: S)?

Curiously enough, Goldman Sachs (NYSE: GS) advised Sprint when merger talks began. Now, the tables favor Goldman Sachs and its clients. At the time, JP Morgan (NYSE: JPM), which advised AT&T, was the number one mergers and acquisitions advisor. Now that the AT&T merger is dissolute, JP Morgan has lost market share in M&A and Goldman Sachs has another chance at pulling through for its client, Sprint.

Goldman is notorious for having a large number of alumni in the US Federal Government. Is it possible that the House of Goldman flexed its influential arm to convince regulators to scrutinize the AT&T, T-Mobile merger?

Why Would Goldman Want to Break Up the Merger?

First and foremost, one of its clients, Sprint, could benefit significantly if it were to merge with T-Mobile. It would create a very large mobile phone provider that would compete with AT&T and Verizon (NYSE: VZ). The merged company would also be able to provide its clients with GSM as well as CDMA-based phones. Moreover, the two individual companies cater to an extremely large user-base that wants high-end phones with relatively cheap data plans. Lastly, the two companies would be able to expand their network to develop communication capabilities that rival AT&T's and Verizon's vast networks.

Apart from its client, Goldman Sachs' position on the league table was significantly hurt by the AT&T, T-Mobile deal. In fact, Goldman was temporarily pushed to third place, behind JP Morgan and Morgan Stanley (NYSE: MS). To pour more salt on the wound, Goldman Sachs' technology, media, and telecom group is its strongest franchise. The TMT group is notorious on Wall Street for grinding out the biggest deals in those sectors and for being the most successful investment banking business in the US.

Does Goldman Have the Influence to Pull it Off?

Over the years, many Goldman Sachs employees have entered government positions, on the statewide and federal level. Some alumni have gone on to be the New Jersey State Governor, the White House Chief of Staff, New Jersey Chief of Staff, and US Treasury Secretary. Other alumni have not been involved with the US Federal Government but with important organizations like the European Central Bank and the Federal Reserve. Considering the high level positions that many of these alumni have, it seems likely that Goldman Sachs would at least be able to prompt investigations into the deal. Ultimately, its influence could have influenced politicians to believe that an AT&T, T-Mobile conglomerate would kill competition in the telecommunications sector.

The Bottom Line:

Goldman Sachs had everything to gain by disrupting the AT&T, T-Mobile merger. It would have expanded Goldman Sachs' market share, brought down its direct competitor, and would have helped out one of its beloved clients. Goldman also has the power to be able to prompt government investigations, and it appears that GS could have played a role in the merger's dissolution.

Recently, Deutsche Telekom's chief executive officer, Rene Obermann, has been trying to find new places to invest in the US. Many analysts contend that Sprint is the only viable long-term solution for the company's T-Mobile brand. According to analysts, Deutsche Telekom was actually considering strategic options with Sprint this past March, but decided to go with T-Mobile. Perhaps now that T-Mobile has limited options, it will follow through with Sprint, and its advisor, Goldman Sachs.

Consumers have a few options when it comes to understanding companies like Sprint and Goldman Sachs. The historical performance could help investors gauge where the company is heading into the future. Investors should also keep up with the news via Benzinga Pro to stay on top of major developments that move markets.

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