Things aren’t looking good for AT&T’s T-Mobile USA acquisition proposal. AT&T withdrew its merger application with the FCC today and agreed to pay a $4 billion pre-tax charge to the affected parties in its next quarterly earnings report.
While AT&T and Deutsche Telekom are still committed to the merger, this action signals that the deal will likely not make it past the courts. The proposed merger is facing opposition from multiple sides, including the FCC’s own chairman.
Instead of taking on the FCC’s scrutiny, AT&T is shifting tactics by withdrawing its application. Efforts will now be focused on fighting the Department of Justice’s antitrust lawsuit against the proposed merger.
The $39 billion deal has been on the rocks for the past several months. AT&T and Deutsche Telekom have been facing opposition from both the DOJ and FCC. Most companies back down after facing such scrutiny, but both carriers are still committed to the merger.
AT&T Inc. and Deutsche Telekom AG are continuing to pursue the sale of Deutsche Telekom’s U.S. wireless assets to AT&T and are taking this step to facilitate the consideration of all options at the FCC and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice either through the litigation pending before the United States District Court for the District of Columbia, Case No. 1:11-cv-01560 (ESH) or alternate means. As soon as practical, AT&T Inc. and Deutsche Telekom AG intend to seek the necessary FCC approval.
As a result of the FCC’s action, AT&T expects to recognize a pretax accounting charge of $4 billion ($3 billion cash and $1 billion book value of spectrum) in the 4th quarter of 2011 to reflect the potential break up fees due Deutsche Telekom in the event the transaction does not receive regulatory approval.
The $4 billion pre-tax charge is a large part of the amount that AT&T would owe if the deal falls through. AT&T agreed to pay Deutsche Telekom and the other affected parties $6 billion if the deal doesn’t close by September of next year. Essentially, this means that AT&T is preparing for the worst.
(via BGR)
