AT&T throws in the towel, abandons scheme to buy T‑Mobile from Deutsche Telekom

For once, fed­er­al reg­u­la­tors have done their job and stood up to Wall Street:

AT&T said late on Mon­day after­noon that it had with­drawn its $39 bil­lion takeover bid for T‑Mobile USA, acknowl­edg­ing that it could not over­come oppo­si­tion from the Oba­ma admin­is­tra­tion to cre­at­ing the nation’s biggest cell­phone ser­vice provider.

The com­pa­ny said in a state­ment that it would con­tin­ue to invest in wire­less spec­trum, but could not over­come oppo­si­tion by both the Jus­tice Depart­ment and the Fed­er­al Com­mu­ni­ca­tions Com­mis­sion.

AT&T’s deci­sion to throw in the tow­el means it now owes Ger­man wire­less giant Deutsche Telekom (the own­er of T‑Mobile) a big breakup fee. AT&T said in a news release that will “rec­og­nize a pre­tax account­ing charge of $4 bil­lion in the 4th quar­ter of 2011” to account for the amount owed to Deutsche Telekom.

T‑Mobile, which is head­quar­tered local­ly in Fac­to­ria (one of Belle­vue’s busi­ness dis­tricts) will remain inde­pen­dent for the time being.

Con­sumer pro­tec­tion and media reform advo­cates hailed the news.

“This deal has been as good as dead for months because the facts nev­er matched AT&T’s fab­ri­ca­tions about the ben­e­fits of the merg­er,” Free Press CEO Craig Aaron said in a state­ment. “As the pub­lic, the Jus­tice Depart­ment and the FCC long ago rec­og­nized — and now even AT&T must admit — this deal would have only meant high­er prices, few­er choic­es and tens of thou­sands of lost Amer­i­can jobs.”

“The Oba­ma admin­is­tra­tion deserves praise and cred­it for stand­ing up to AT&T’s relent­less lob­by­ing and pro­pa­gan­da,” he added.”

“And the Amer­i­can pub­lic can breathe a sigh of relief that this time the pub­lic inter­est trumped AT&T’s self-serv­ing attempt to kill off what lit­tle com­pe­ti­tion remains in the wire­less market.”

“In this age of cyn­i­cism, it is impor­tant for the Amer­i­can peo­ple to see that Wash­ing­ton [D.C.] does not always go to the high­est bid­der,” agreed Harold Feld, legal direc­tor for Pub­lic Knowl­edge. “The Depart­ment of Jus­tice and the Fed­er­al Com­mu­ni­ca­tions Com­mis­sion stood up to tremen­dous lob­by­ing pres­sure as AT&T spent tens of mil­lions of dol­lars try­ing to push this merg­er through.”

“We hope that AT&T and T‑Mobile will focus on deploy­ing the best, most com­pet­i­tive net­works pos­si­ble rather than try­ing to merge to duop­oly. These busi­ness­es are fun­da­men­tal­ly sound, and have what it takes to bring broad­band and jobs to Amer­i­ca on their own. We look for­ward to see­ing them rethink what’s pos­si­ble, rather than try­ing to rule the air.”

From the day it was announced, NPI has been strong­ly opposed to this merg­er, and we are very hap­py that it has been aban­doned. Had AT&T and T‑Mobile been allowed to merge, it would have set the stage for Ver­i­zon to poten­tial­ly buy Sprint down the road — which would have left us with an anti­com­pet­i­tive, entrenched duop­oly in the wire­less indus­try. Now, that won’t happen.

Con­trary to what AT&T has claimed, this deal was not need­ed for either it or T‑Mobile to remain healthy. AT&T iron­i­cal­ly just proved this by dis­clos­ing the sign­ing of a new roam­ing agree­ment with Deutsche Telekom in its news release about the aban­don­ment of the T‑Mobile acquisition.

T‑Mobile, mean­while, will undoubt­ed­ly have oppor­tu­ni­ties to strength­en its com­pet­i­tive posi­tion. For instance, the CEO of Dish Net­work has pub­licly expressed inter­est in cre­at­ing a part­ner­ship with T‑Mobile to help it build a stronger nation­wide net­work. (Dish owns some spec­trum, but does­n’t have enough resources to build out its own wire­less network).