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AT&T said late on Monday afternoon that it had withdrawn its $39 billion takeover bid for T-Mobile USA, acknowledging that it could not overcome opposition from the Obama administration to creating the nation’s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