AT&T pulls the plug on $39B acquisition of T-Mobile USA

AT&T (NYSE:T) ended its nearly nine-month-long bid to acquire T-Mobile USA from Deutsche Telekom for $39 billion, bringing to a close a deal that captivated the wireless industry this year and sparked a fierce battle between AT&T and T-Mobile and federal regulators and AT&T's competitors.

AT&T said it will record a pretax accounting charge of $4 billion in the fourth quarter and said it will enter a mutually beneficial roaming agreement with Deutsche Telekom's T-Mobile. When AT&T and T-Mobile first announced the deal in March, they disclosed that AT&T would have to pay a $6 billion breakup fee to Deutsche Telekom, including $3 billion in cash and $3 billion in spectrum and roaming agreements. Analysts have said that the two companies might try and enter into a network-sharing deal, but there was no mention of that in AT&T's statement.

In its statement, AT&T said that there is a mounting need for more wireless spectrum in the United States that needs to be addressed. "The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage," the company said. "In the absence of such steps, customers will be harmed and needed investment will be stifled."

The decision to discontinue the transaction came after the Department of Justice sued to block the deal on antitrust grounds in August. The FCC, which also needed to approve the deal, never moved to formally block it, but did release a report that was highly critical of the deal's purported public-interest benefits. Many entities--most notably Sprint Nextel (NYSE:S)--came out against the deal, which began to crumble during the past few weeks as AT&T failed to line up buyers for T-Mobile's assets in a bid to placate regulators.

Last week AT&T filed a motion with U.S. District Judge Ellen Huvelle asking that all court proceedings between AT&T and the Justice Department be stayed until Jan. 18 so that AT&T and Deutsche Telekom could "evaluate all options." The Justice Department joined in the motion and Huvelle granted it.

For more:
- see this release

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