Thanksgiving Turkey: AT&T, T-Mobile Pull Merger Application From The FCC

Today, on a public holiday in the U.S., AT&T (NYSE: T) and Deutsche Telekom (NYSE: DT) issued a statement saying they would be withdrawing their merger application from the FCC. Additionally, AT&T will post a charge of $4 billion due to the risk of the deal collapsing. The news comes two days after the Federal Communications Commission said it would not immediately approve the merger of AT&T and T-Mobile, and would instead ask for a hearing on the matter. But that’s not the end of the story…

The two also noted in their statement that they would continue to pursue the sale of T-Mobile USA to AT&T, and would now focus their main efforts on getting antitrust clearance first from the Department of Justice.

And in perhaps another sign of the two operators preparing themselves for the worst — the deal not getting approval by any regulator, communications or otherwise — AT&T said it would “recognize” that it may have to make a pretax accounting charge to reflect the possible break-up fees that it would have to pay to Deutsche Telekom in the event that the deal does not go through.

The two companies said that the decision to withdraw their application from the FCC was made after the FCC said on November 22 that it would take the proposed order for the sale to the hearing stage. That application with the FCC was first filed back on April 28, when AT&T first announced its intention to buy T-Mobile USA from Deutsche Telekom.

AT&T and T-Mobile have tried to put a positive spin on the news, and said in their statement that this was a “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.” Once that clearance from the DoJ is given, Deutsche Telekom and AT&T will return to the FCC for approval.

In addition, AT&T announced it expects to recognize a pretax accounting charge of $4 billion to reflect the potential break up fees due to Deutsche Telekom in the event that the transaction does not receive regulatory approval.

That charge is related to $3 billion in cash that AT&T would have to pay to Deutsche Telekom in the event of the deal falling though; and $1 billion in book value on wireless spectrum.

Since announcing their intention to sell T-Mobile USA to AT&T for $39 billion, AT&T and Deutsche Telekom have come up against a significant amount of opposition to the deal, from competitive operators like Sprint to legislators and consumer groups.