AT&T and T-Mobile announced Thursday that they have withdrawn their application for FCC approval of their $39 billion deal, which has been challenged by the US Justice Department. AT&T will take a one-time pre-tax $4 billion accounting charge to “reflect the potential break up fees due Deutsche Telekom in the event the transaction does not receive regulatory approval.” Deutsche Telekom AG owns T-Mobile; in a statement, the companies said that they had taken action after FCC chair Julius Genachowski indicated on Tuesday that he intends to put AT&T and T-Mobile through a “long and excruciatingly expensive administrative hearing” after the similarly “long and excruciatingly expensive court case the Justice Department has already lined up.”
The $4 billion represents the $3 billion cash and $1 billion book value of spectrum that AT&T had pledged in break-up fees to Deutsche Telekom, should the transaction not win regulatory approval. If AT&T and T-Mobile had chosen to face the FCC, it would have been at least a year before the deal could have been approved.
FCC staff said that, contrary to AT&T’s and T-Mobile’s claims, the merger would not produce benefits for consumers in the form of creating jobs — AT&T claimed 96,000 would arise from the deal — and expansion of wireless broadband, and that the proposed merger would further winnow down competition in the wireless market.
Public interest advocates called on AT&T to simply withdraw the deal. By withdrawing the application, the FCC is now unable to publicize its information showing that the deal is not in the interest of consumers:
“Withdrawal of the FCC applications should be seen for what it is: a concession that the deal would create a duopoly in the national wireless market that will result in higher prices and reduced choice in handsets,” said Andrew Jay Schwartzman, of the Media Access Project, in a statement. “AT&T was unable to show that it actually needs T-Mobile’s assets to build out high-speed broadband.”
AT&T announced the deal in March and has since been engaged in an intensive campaign to promote it to the public, state and federal regulators, unions and Congress. Back in March, the climate for the merger had seemed more favorable: The White House was stressing the need for “near-ubiquitous mobile broadband, which AT&T promised the acquisition would help accomplish.” Also, just a few months earlier, the government had approved a major telecom merger, between Comcast and NBC Universal; with the economy lagging, the government seemed in the mood to have a “friendly dialogue with corporate America.”
But then came Occupy Wall Street and the spread of anti-corporate America sentiment.
“Occupy protesters everywhere should take heart that one of the most politically well-connected corporations does not always get whatever it wants from the U.S. government,” said Cathy Sloan, vice president of the Computer and Communications Industry Association. “This is one company that is not going to get a pass.”
Despite AT&T’s carefully orchestrated lobbying campaign, which won over many state attorneys general and members of Congress, the public hostility toward corporate interests has been growing. That was evident in the consumer backlash against Bank of America’s proposed debit card fees and word that consumers were withdrawing savings from big banks and turning to smaller credit unions.
In their statement, AT&T and T-Mobile said that they would refile with the FCC “as soon as practical.”
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Photo by Roger Schultz