AT&T- T-Mobile Merger looks to be over, companies pursuing a tactical workaround

Seth Weintraub | Nov 24 2011 - 5:55 am PT

Image via ARS

Big news today (surprisingly on a 4 day US weekend). The AT&T and T-Mobile merger was withdrawn from the FCC today.

On November 23, 2011, AT&T Inc. and Deutsche Telekom AG electronically withdrew without prejudice, as of that date, the pending applications listed in the Public Notice released by the Federal Communications Commission on April 28, 2011 in that proceeding. Associated manual notification of withdrawal filings also are being made.

The two companies look to be pursuing an alternative plan…

AT&T Inc. and Deutsche Telekom AG are continuing to pursue the sale of Deutsche Telekom’s U.S. wireless assets to AT&T and are taking this step to facilitate the consideration of all options at the FCC and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice, either through the litigation pending before the United States District Court for the District of Columbia, Case No. 1:11-cv-01560 (ESH) or alternate means. As soon as practical, AT&T Inc. and Deutsche Telekom AG intend to seek the necessary FCC approval.

But, AT&T has taken a $4B pre-tax charge in recognition that the deal isn’t likely to be going through and they are likely going to have to pay T-Mobile for the effort as part of the original merger agreement. That means the deal is pretty much over, at least in the eyes of AT&T’s own accountants.

As a result of the FCC’s action, AT&T expects to recognize a pretax accounting charge of $4 billion ($3 billion cash and $1 billion book value of spectrum) in the 4^th quarter of 2011 to reflect the potential break up fees due Deutsche Telekom in the event the transaction does not receive regulatory approval.

AT&T’s efforts to spin the merger as good for consumers and creating jobs for the economy pretty much flies in the face of everything we know about competition (needed in the wireless space) with mergers reducing redundancy (people) and waste. It appears that no one was buying it, even at the prices AT&T was willing to pay.