AT&T has temporarily withdrawn its application with the FCC to acquire T-Mobile, and will instead focus on getting approval from the Justice Department for the merger. This comes just days after FCC chairman Julius Genachowski sent out a draft proposing an additional administrative hearing on the proposed AT&T buyout of T-Mobile.
In addition to putting the brakes on its FCC application, AT&T also expects to take a $4 billion pretax charge to account for “potential break up fees” that would be due to Deutsche Telekom for the deal. AT&T made this announcement through a press release on its website.
If AT&T’s aquisition of T-Mobile ever happens, it would make AT&T the largest wireless carrier in the nation. But the acquisition is receiving a lot of friction — from government bodies, competing carriers and consumers.
In late August, the Justice Department filed an antitrust suit to block AT&T’s acquisition of T-Mobile, claiming that the merger would “would remove a significant competitive force from the market.” A number of T-Mobile subscribers rejoiced at this announcement. Sprint also filed suit against the merger, saying it would create a duopoly between the wireless carriers AT&T and Verizon.
“They’re getting a lot of pushback from the FCC, but they’re pretty adamant about wanting the merger to go through,” Gartner analyst Michael King says about the AT&T’s proposed T-Mobile acquisition. “They’ve got a lot at stake with the explosive data growth they’ve seen, and it would help the cause out a lot with [T-Mobile's] spectrum.”
AT&T continues to maintain that a merger with T-Mobile would create many thousands of new jobs and allow for billions of dollars in new investments.
For consumers, though, it could likely mean higher prices and potentially fewer cool new handsets on smaller competing carriers. It would also give AT&T enough power to push smaller regional carriers out of the market.
Gigi B. Sohn, president of an advocacy group called Public Knowledge, told the LA Times that AT&T’s move to temporarily withdraw its bid would “prevent the FCC from making public its many well-documented findings that the deal is not in the public interest” and would prevent the judge presiding over the antitrust suit from seeing these conclusions.
It doesn’t look like AT&T is going to give up without a fight, though.
“As soon as practical, AT&T Inc. and Deutsche Telekom AG intend to seek the necessary FCC approval,” AT&T said in a statement.
But depending on how much the FCC and Department of Justice put up a fight, there could be a point when AT&T does eventually bow out.
“There’s going to be some threshold where the cost of pursuing it is probably going to outweight the benefit,” iSupply analyst Francis Sideco says. “It really depends on how AT&T is planning on leveraging this acquisition — What is the most valuable to them. Is it the wireless spectrum, the subscribers that come with it, or is it the leverage on the supply chain?”