AT&T’s attempt to purchase T-Mobile may have fallen through, and AT&T is getting ready to pay a massive indemnity to T-Mobile in the form of cash and wireless spectrum.
AT&T and T-Mobile’s parent company Deutsche Telekom have told the Federal Comminications Commission (FCC) they wish to withdraw their request for this $39 billion dollar deal. AT&T also warned investors it was expecting to take a charge of $4 billion next quarter — $3 billion cash and $1 billion of spectrum — that will be given to Deutsche Telekom if this deal doesn’t go through.
The huge cash and spectrum payment is intended to compensate T-Mobile for lost customers who switched to AT&T on the assumption that the smaller carrier would be absorbed by its much larger rival.
This isn’t the end of the matter, however. The statement from the two companies said they 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.”
At the end of August, the DOJ filed filed a lawsuit to prevent AT&T from buying T-Mobile. The reason given at that time was that having the second largest U.S. carrier buy the fourth largest would “substantially lessen competition”. AT&T responded by saying “The DOJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court.”
Meanwhile, the FCC hasn’t yet announced if it will allow the two to withdraw their attempted deal. There are two other options: it could deny the request and the process would continue as before, or this government agency could allow it to be withdrawn with prejudice, blocking them from re-submitting the requested merger again.