AT&T and T-Mobile withdraw FCC merger application

AT&T and T-Mobile have abandoned attempts to seek approval for a merger from the Federal Communications Commission.

The decision follows an announcement from FCC chairman Julius Genachowski that he intended to refer the deal to an administrative law judge for review – the strongest possible indication that the FCC was aiming to block the deal.

By withdrawing the application, AT&T ensures that the FCC can’t make public documents that would show the potential effects of the merger. While AT&T has claimed that it would generate thousands of new jobs, the documents may well show otherwise.

In a statement, AT&T says it hopes to gain merger approval in other ways. It says it plans to continue with efforts to win antitrust clearance for the transaction from the Department of Justice either through the litigation pending with the US District Court for the District of Columbia, or by ‘alternate means’. 

“As soon as practical, AT&T Inc. and Deutsche Telekom AG intend to seek the necessary FCC approval,” says the company.

However, it’s ready for failure, saying it’s prepared to hand over the penalty fees owed to Deutsche Telekom if the merger fails to go ahead.

It says it expects to recognize a pretax accounting charge of $4 billion  – $3 billion in cash and $1 billion in spectrum – in the 4th quarter this year.

“Sure, AT&T may be on the hook for a breakup fee. But the $3 billion cash part of the arrangement if the deal falls apart is 1/10th of one quarter’s revenues,” says Art brodsky of Public Knowledge, which has been lobbying against the deal.

“And the $3 billion spectrum and roaming access AT&T is supposed to throw in as part of the arrangement is bookkeeping.”