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Germany gloomy over AT&T merger

Fears T-Mobile deal is kaput

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The German government, the largest shareholder in Deutsche Telekom, is not sharing the telco's optimism that the deal to merge its US mobile operations – T-Mobile USA – with AT&T will go through.

Officials have told (paywall) the Financial Times that Berlin is increasingly worried that the deal will go down the tubes because of antitrust concerns from the US Department of Justice and the US Federal Communications Commission (FCC).

They added that Deutsche Telekom hadn't been given a full picture of the regulatory risks of the merger early enough in the process.

Deutsche Telekom and AT&T have insisted that the merger will go ahead, despite withdrawing their application from the FCC last week to avoid an administrative hearing.

Just yesterday, the German company confirmed to The Register that it was still going forward with the deal.

"Our focus, as we communicated last Thursday, is on the lawsuit initiated by the DoJ. We will submit a new application for approval, together with our partner AT&T, to the FCC at an appropriate time," a Deutsche Telekom spokesperson said.

But market observers are more or less convinced the deal is done. The DoJ is suing the two firms over the merger, which it believes will violate anticompetition laws.

The FCC is also concerned about anticompetition, and has said that the proposed union won't have the benefits that the US carriers are touting for the deal, whether for job creation or for consumers.

The only ways to pursue sharing wireless capacity, the main motivator for the deal, appear to be to continue with the merger but divest some assets to satisfy competition legislation, or to abandon the merger but push ahead with a joint venture in the US instead.

Rumours abound that AT&T has been approaching smaller US telcos such as Leap and MetroPCS to discuss selling off some assets, but Deutsche Telekom has denied that there is any 'plan B', such a joint venture, if the merger should fail.

If the telcos are forced to abandon the deal, AT&T is liable for a $4bn break-up fee to Deutsche Telekom. But the German firm will suffer too, as it will probably still want to get rid of T-Mobile USA, but won't be as likely to get a good price. ®

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