AT&T admits defeat on T-Mobile takeover, will pay $4 billion breakup fee

AT&T logoAfter encountering stiff opposition from the Justice Department and the Federal Communications Commission, AT&T announced Monday that it was abandoning its bid to take over T-Mobile. Here's how AT&T spun the news:

The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage. In the absence of such steps, customers will be harmed and needed investment will be stifled.

 

AT&T will continue to be aggressive in leading the mobile Internet revolution" said Randall Stephenson, AT&T chairman and CEO. “Over the past four years we have invested more in our networks than any other U.S. company. As a result, today we deliver best-in-class mobile broadband speeds—connecting smartphones, tablets and emerging devices at a record pace—and we are well under way with our nationwide 4G LTE deployment."

The deal's future has been uncertain ever since August, when the Department of Justice filed suit to stop the transaction. AT&T promised to fight on, but the deal's prospects became even gloomier when the FCC piled on, threatening to refer the case to an administrative law judge for an examination of its legality under antitrust law. The FCC also released a staff report that was harshly critical of the deal.

AT&T began an increasingly desperate search for a way to salvage the deal. "We are actively considering whether and how to revise our current transaction to achieve the necessary regulatory approvals," a spokesperson said last week. But that search apparently came up empty.

AT&T says it will "recognize a pretax accounting charge of $4 billion"—that includes a $3 billion breakup fee AT&T agreed to pay T-Mobile if the deal fell through, as well as spectrum rights worth another $1 billion. AT&T will also "enter a mutually beneficial roaming agreement with Deutsche Telekom."

While the failure of the deal is obviously a big blow to AT&T, it represents something of a strategic triumph for T-Mobile and its parent company, Deutsche Telekom. Not only will it have an extra $3 billion worth of cash in the bank, but the increased spectrum and the new roaming agreement will allow T-Mobile to compete more effectively against its larger rivals.

Free Press, one of the deal's most persistent critics, was jubilant. "This deal would have only meant higher prices, fewer choices and tens of thousands of lost American jobs," said CEO Craig Aaron. "Good riddance."

But Ryan Radia, an analyst at the Competitive Enterprise Institute, faulted the FCC for interfering with the case. "Had AT&T moved forward, it would have had to defend the deal before an administrative law judge employed not by a court of law, but by the FCC," he told Ars. And that judge would have been evaluating the deal under the "nebulous" standard of the "public interest."

Source: Ars Technica

Tags: AT&t, mobile communications, USA

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