AT&T, T-Mobile reconsider merger

WASHINGTON — Acknowledging the mounting difficulties in obtaining government consent for their proposed merger, AT&T Inc. and the parent company of T-Mobile USA Inc. said Thursday that they had temporarily withdrawn their application to the Federal Communications Commission and will focus first on battling the Justice Department for approval of the deal.

AT&T also said it expected to take a pretax accounting charge of $4 billion in the fourth quarter “to reflect the potential breakup fees” it would have to pay to T-Mobile parent Deutsche Telekom AG of Germany if the deal is not approved.

The announcements reflect the growing unlikelihood that the huge telecommunications deal will ever go through.

On Tuesday, FCC Chairman Julius Genachowski came out against AT&T’s proposed $39 billion purchase of T-Mobile. He moved to refer the deal to an administrative law judge for a hearing that could sink its approval.

Facing a lengthy delay and the possible release at such a hearing of confidential information it had provided to the FCC, the two companies said they had electronically withdrawn their FCC application late Wednesday.

AT&T and Deutsche Telekom “are continuing to pursue the sale of Deutsche Telekom’s U.S. wireless assets to AT&T,” the companies said in a statement posted on AT&T’s website Thursday. But given the FCC move, the companies said they would “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 … or alternate means.”

In August, the Justice Department filed a civil antitrust lawsuit seeking to block the deal, arguing it would hurt competition in the wireless market. AT&T is second in subscribers only to Verizon Wireless, and the Justice Department said the acquisition of the fourth-largest carrier, T-Mobile, would lead to higher prices and fewer choices for consumers.

If AT&T and Deutsche Telekom win the lawsuit, or obtain approval through other means such as a settlement, they said they would then file again with the FCC “as soon as practical.” Both the Justice Department and the FCC must approve a deal.

Gigi B. Sohn, president of advocacy group Public Knowledge, which opposes the deal, said the companies withdrew their FCC application to avoid disclosing just how bad the deal would be for consumers.

“AT&T’s move will, for the moment, prevent the FCC from making public its many, well-documented findings that the deal is not in the public interest and will prevent the judge overseeing the antitrust lawsuit from seeing the FCC’s conclusions,” Sohn said.

She and Andrew Jay Schwartzman, policy director of nonprofit law firm Media Access Project, said AT&T should give up.

“This turkey is too big to be hidden by releasing it on Thanksgiving,” Schwartzman said of the Thanksgiving Day announcement by the companies. “It is an act of desperation which will only hurt their shareholders by delaying the inevitable. It is time for vainglorious managers at AT&T to accept that there is no way that this deal can obtain approval of the FCC and the courts.”