Expensive failure as AT&T and T-Mobile takeover on the brink

By Updated on

The proposed takeover of T-Mobile by AT&T has been going on for months now as the deal has been met with strong opposition from some quarters. Now it seems there could be an expensive failure as the AT&T and T-Mobile takeover is on the brink of collapse.

AT&T have now said if the proposed takeover fails to materialize it will take the $4 billion charge now just in case, as according to Reuters US regulators have said it would kill jobs and hit competition. Both companies involved in the deal have said it would continue to try and get approval of the $39 billion takeover from the US Department of Justice.

Also See: EE UK and T-Mobile.co.uk down for maintenance

They have withdrawn applications though from the industry’s regulator for the time being, and said in a statement “AT&T Inc and Deutsche Telekom AG are continuing to pursue the sale of Deutsche Telekom’s U.S. wireless assets to AT&T”.

The sum of $4 billion is made up of $3 billion in cash as well as a book value of $1billion for spectrum access. There is a lot of opposition to the deal including from both the U.S. Federal Communications Commission and DOJ, which is because of the fact there would only be three national mobile carriers left.

One senior FCC official has said that any such merger “would result in a massive loss of U.S. jobs and investment”. The withdrawal of the application still has to be approved by the FCC as it can decide how the companies can resubmit it in the future. Even if it does get approval it could still be blocked by the DOJ, but both companies have said they would go back to the FCC process if it won approval by the DOJ.

Randall Stephenson, Chief Executive of AT&T had great confidence in the deal when it was first announced in March, and that’s why such a big break-up fee was agreed. Analysts are saying that AT&Ts decision to take the $4 billion charge this quarter showed how its confidence in the deal going through had fallen.