AT&T Pulls the Plug on T-Mobile Bid at FCC

This past Thanksgiving, AT&T (NYSE:T) and Deutsche Telekom AG were not likely very thankful to the U.S Federal Communications Commission (FCC).

The FCC circulated a draft order last week, that outlined the commission's opposition to the pending $39 billion merger of Deutsche Telekom's T-Mobile USA unit and AT&T. That draft order in turn caused AT&T Inc. and Deutsche Telekom to announce on Thanksgiving that they were withdrawing the pending applications listed in the Public Notice released by the FCC.

"This formal step today is being undertaken by both companies to consolidate their strength and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice," the two companies said in a joint statement. "As soon as practical, Deutsche Telekom and AT&T intend to seek the necessary FCC approval."

At the end of August, the U.S. Department of Justice made its own move to block the merger.

"T-Mobile has been an important source of competition among the national carriers, including through innovation and quality enhancements such as the roll-out of the first nationwide high-speed data network," said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice's Antitrust Division in August. "Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer."

Though AT&T and T-Mobile still plan to get the merger approved at some future point, the withdrawal of the FCC application is not without immediate consequences.

"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," AT&T noted in a statement.

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.