With T-Mobile, did AT&T fail to read the wireless tea leaves?

On Monday, AT&T dropped its $39 billion bid to acquire T-Mobile.

At first, it seemed inevitable. The second-largest U.S. carrier was coming off a record run after securing the Apple iPhone first for its network, and the fourth-largest U.S. carrier was smarting after each of its competitors gained access to Apple's popular device except for it. To boot, parent company Deutsche Telekom wanted a way out of the U.S. market. From 30,000 feet, the deal seemed all but done.

Except it wasn't. What became painfully clear in the last 24 hours is that AT&T didn't do its due diligence -- not in a legal sense, but of the common variety. From the beginning, consumers and industry analysts crowed about how the deal -- which would leave just three major wireless carriers in the very large U.S. -- would harm industry competition. But that wasn't what killed the deal -- the U.S. Federal Communications Commission and Department of Justice did.

That's precisely the problem. The AT&T folks involved with the deal clearly did not do enough legwork to understand that the federal government was determined not to let the deal through, at least not without drastic modification, from nearly the very beginning. Call it arrogance or mere ignorance, but AT&T clearly though it had this one in the bag -- or it would not have agreed to such a steep consolation prize ($3 billion and additional spectrum, among other savory items) with the competitor it so deeply wanted to acquire.

There will be much ink spilled about how this does and does not affect consumers, but the real story is how strongly AT&T swung -- and missed. During FarmVille game developer Zynga's initial public offering on Friday, I remarked to ZDNet editor-in-chief Larry Dignan about the lack of a share price "pop" after the stock debuted at $10 a share. (At the moment we spoke, it was hovering around $11.)

"That's a good thing," he replied. "It means they didn't get screwed out of a ton of money by their lawyers."

In other words, financial arrangements are at their best when neither party is surprised. If AT&T felt there was a good chance of the Feds axing its plans, it would have worked to negotiate a considerable reduction in T-Mobile's spoils for failure. Now, it's the only wireless carrier in the U.S. that's reeling: Verizon and Sprint didn't waste a year's worth of time and money with such distractions, and T-Mobile is compensated for it and then some.

Mergers and acquisitions are never straightforward, and this one proved to be a headache no matter which way you cut it. But in the end, I can't help but wonder: what was AT&T thinking?