TELECOMS GIANT AT&T has revealed it will take a $4bn hit in the clearest indication yet that its bid to buy T-Mobile USA from Deutsche Telekom is about to end in failure.
AT&T's proposed $39bn purchase of T-Mobile USA from Deutsche Telekom came with a clause that should the deal fall through AT&T will have to pay billions to the German telco. Earlier this week, the US Federal Communications Commission (FCC) had ordered an 'extra review' of the deal, and now both AT&T and Deutsche Telekom have withdrawn their applications to the FCC, with AT&T publicly admitting that it will book a $4bn loss on the deal this quarter.
Ever since AT&T announced its decision to buy T-Mobile USA there has been stiff opposition, with both the FCC and the US Department of Justice (DoJ) looking into the deal. The deal would have left some American consumers with no choice of wireless provider, something that harks back to the bad old days of Ma Bell.
AT&T and Deutsche Telekom argued that by combining resources consumers could get better service, create more jobs and help both firms handle the expected growth in mobile data. But regulators and customers never saw it that way and so AT&T's dream of overtaking Verizon through acquisition of T-Mobile USA seems to be all but over.
According to a joint statement released by AT&T and Deutsche Telekom, they are withdrawing their FCC applications to "focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice". The DoJ has already begun litigation against AT&T regarding its proposed purchase of T-Mobile USA.
Originally AT&T was believed to be on the hook for $3bn should the deal go belly-up, but the company confirmed that not only will it have to fork over $3bn in cold hard cash, but also a further $1bn as the "book value of spectrum" to Deutsche Telekom. While AT&T said the money will only be transferred should the deal fail to receive regulatory approval, the fact that the firm has said it expects to record that loss in this quarter speaks volumes as to the expected outcome of the DoJ trial. µ