Original URL: http://www.theregister.co.uk/2011/11/25/at_t_tmobile_usa_merger_on_the_rocks/

AT&T poised to kick T-Mobile USA out of bed

Proposed merger on the rocks as firms give up on FCC for now

By Brid-Aine Parnell

Posted in Financial News, 25th November 2011 12:38 GMT

AT&T and Deutsche Telekom have given the first signal that they might give up on the marriage proposal for T-Mobile USA after heavy opposition from the US government.

The companies have withdrawn their application to the Federal Communications Commission (FCC) and will focus on handling the flak they face over the merger from the Department of Justice first.

The DoJ is suing the two firms on anticompetitive grounds to stop AT&T taking T-Mobile USA off Deutsche Telekom's hands. The break-up would cost AT&T billions in breakup fees and concessions, estimated from $4bn and upwards.

"This formal step today is being undertaken by both companies to consolidate their strength and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice," Deutsche Telekom, parent to T-Mobile USA, said in a canned statement.

The withdrawal comes just a day after the FCC said it was going to take the rather unusual step of having an administrative hearing on the merger, an event that is exceedingly rare and usually leads to suitors giving up on consummation.

AT&T said in its own statement that the two firms were taking this step to "facilitate the consideration of all options at the FCC" as well as sorting things out with the DoJ, and they'd be going back to the FCC for approval "as soon as [is] practical".

However, despite this optimism, the US carrier is also setting aside a $4bn accounting charge in the fourth quarter "to reflect the potential break-up fees due Deutsche Telekom in the event the transaction does not receive regulatory approval".

Both telcos have insisted that marrying T-Mobile USA to AT&T is a great idea that won't restrict competition and will give loads of jobs to Americans.

However, the FCC has said that the merger would lead to "massive" layoffs, while the DoJ has said that the coupling would result in "tens of millions of consumers all across the US facing higher prices, fewer choices and lower quality products for mobile wireless services".

AT&T is the largest wireless carrier in America, with around 95.5 million subscribers, while T-Mobile USA is the fourth largest, carrying about 23 million customers. ®