AT&T Inc.’s withdrawal of its FCC application to buy rival T-Mobile USA Inc. puts the focus on litigation with U.S. antitrust authorities seeking to block the $39 billion deal.
AT&T and T-Mobile owner Deutsche Telekom AG (DTE) pulled their applications to the Federal Communications Commission to devote their attention to winning Justice Department clearance, the companies said in separate statements today. AT&T said it would record one-time costs of $4 billion, and would renew efforts to seek FCC approval “as soon as practical.”
“It is an act of desperation which will only hurt their shareholders by delaying the inevitable,” Andrew Jay Schwartzman, policy director of Media Access Project, a Washington-based nonprofit law firm, said today in an e-mailed statement. “There is no way that this deal can obtain approval of the FCC and the courts,” said Schwartzman, a deal opponent.
The companies’ move comes in the face of increasing resistance by U.S. regulators to the transaction, which would eliminate the fourth-largest U.S. wireless carrier and make AT&T the nation’s largest mobile provider.
The Justice Department sued in August to block the merger as anti-competitive, and FCC Chairman Julius Genachowski recommended on Nov. 22 that the deal be sent to a hearing before an agency law judge. The move, which signals an attempt to block the deal, needs a vote of FCC commissioners that hasn’t happened yet.
“At this point it’s in AT&T’s best interest to reach an amicable settlement” with the Justice Department, Samuel S. Kang, general counsel for the Greenlining Institute, a Berkeley, California-based consumer group that opposes the merger, said in an interview. It’s not clear what the outlines would be for a settlement, Kang said.
Dallas-based AT&T has said the purchase of T-Mobile would create jobs and hasten the spread of high-speed wireless Internet service, or broadband.
The $4 billion pretax costs reflect potential breakup fees due to Deutsche Telekom, AT&T said today.
FCC staff members said during a Nov. 22 conference call that they had concluded the deal would diminish competition and lead to job losses. The agency didn’t find evidence that the deal would significantly speed broadband deployment, according to the FCC staff, who spoke under ground rules that forbade identification.
With AT&T’s withdrawal, the FCC could dismiss the application with prejudice, Harold Feld, legal director of Washington-based advocacy group Public Knowledge that opposes the merger, said in an e-mailed statement today. The effect would be to tell AT&T, "‘You’re done. Don’t come back to us with anything like this again,’" Feld said.
The agency could grant the application to withdraw and perhaps allow AT&T to try again, or it could send the motion to withdraw to the administrative law judge along with the rest of the case, Feld said.
"The Commission today received a request from AT&T and Deutsche Telekom to withdraw their applications regarding AT&T’s acquisition of T-Mobile, agency spokeswoman Tammy Sun said in an e-mailed statement. "The Commission will consider that request."
Michael Balmoris, a Washington-based spokesman for AT&T, declined to comment.
Gina Talamona, a Justice Department spokeswoman, declined to comment.
U.S. District Judge Ellen Huvelle is hearing the Justice Department’s lawsuit against the merger in a trial set to begin Feb. 13. The next hearing on the case is Nov. 30. The case is U.S. v. AT&T Inc. (T), 1:11-cv-01560, U.S. District Court, District of Columbia (Washington).