NOTE: GrowthBeat -- VentureBeat's provocative new marketing-tech event -- is a week away! We've gathered the best and brightest to explore the data, apps, and science of successful marketing. Get the full scoop here, and grab your tickets while they last.
Question: What costs over $4 billion and a coveted slice of wireless spectrum? Answer: The stipulation included in AT&T’s bid to purchase rival carrier T-Mobile USA in the event the sale doesn’t go through.
Today, AT&T and current T-Mobile USA owner Deutsche Telekom announced that they are withdrawing the application for the merger, which was pending approval from the Federal Communications Commission. As a cautionary measure, AT&T has listed the $4 billion pretax charge on its Q4 2011 accountancy sheet, which includes a $3 billion payout to Deutsche Telekom, a portion of wireless spectrum valued at $1 billion and other assets. However, AT&T’s total loss could amount to $6 -$7 billion if the merger fails.
Both company’s still intend to pursue the merger, but it seems very unlikely to gain approval from government regulators.
AT&T and Deutsche Telekom first announced plans for AT&T to acquire T-Mobile USA for $39 billion in March 2011. T-Mobile, which is the fourth largest wireless carrier, has struggled to compete against Verizon, AT&T and Sprint. So, selling to a competitor for a large sum (or getting a payout if it doesn’t work out) is obviously an attractive option. AT&T, on the other hand, is interested in swallowing up T-Mobile to improve its wireless network infrastructure and eliminate competition.
Due to widespread opposition to the acquisition, it makes sense that AT&T is factoring in the $4 billion loss to its record books. In September, Attorney Generals from seven U.S. states joined the Department of Justice in filing a federal lawsuit against the merger. More recently, the FCC announced that it’s seeking a hearing on the merger before giving it approval. The deal also faces a lawsuit by third-largest wireless carrier Sprint on the grounds that it would eliminate competition.
As for withdrawing the FCC application, Reuters reports that the move is part of a strategy by both companies to refocus their efforts on gaining antitrust approval for the merger from the DOJ.