AT&T, T-Mobile Acquisition Deal Cancelled [AT&T Finally Calls it Quits; Will Pay Deutsche Telekom More Than $3 Billion as Settlement, But Still Plans to Pursue Other Deals to Improve Mobile Broadband Capacity]

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After months of negotiation, rallying for support, and fighting the DoJ and FCC, AT&T is finally cancelling its proposed acquisition of T-Mobile. The telecoms company is now getting ready to pay settlement fees to the tune of $4 billion.

AT&T has finally decided to surrender, amid facing challenges from the legal and regulatory bodies in the country. The company reports that “after a thorough review of options,” it has agreed to back out of the proposed acquisition of T-Mobile from parent company Deutsche Telekom. The deal had been blocked by the DoJ with an antitrust lawsuit. Meanwhile, the FCC has also sought a legal opinion, questioning whether the $39 billion merger had the public interest in mind.

In a statement, AT&T says their decision to cancel the merger was due to these difficulties, although they say that the realities of the U.S. wireless industry remain unchanged. One of the reasons the company sought to merge with T-Mobile was to improve its mobile broadband capacity. Still, the network will pursue further alternative actions that will help them toward this end. AT&T chairman and CEO Randall Stephenson states that they will continue to be “aggressive in leading the mobile internet revolution.”

The company says it will continue to invest to add capacity to meet the needs of the market, particularly a nationwide 4G LTE deployment. The executive, however, suggested that the U.S. “allow the free markets to work so that additional spectrum is available to meet the immediate needs of the U.S. wireless industry.” He cites AT&T’s pending acquisition of unused spectrum owned by Qualcomm, which is currently under process by the FCC.

Given the terms of AT&T’s agreement with Deutsche Telekom, the company will be paying a $3 billion settlement due to the deal cancellation, and has prepared a pre-tax accounting charge of $4 billion to cover for this amount in the 4th quarter of 2011. The settlement deal will also include concessions such as discounts and roaming agreements, which might cost AT&T another $3 to $4 billion. However, AT&T and T-Mobile still plan to enter alternative joint venture deals even with the cancelled acquisition.

Given the huge cost of having cancelled the transaction, one might wonder whether the merger has been a good idea at all, in the first place.

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