AT&T said it will take a $4 billion pre-tax charge in the event that its acquisition of T-Mobile USA collapses, in a move that would seem to be an acknowledgement of odds stacking up against the proposed merger.
The communications giant for the time being withdrew its application from the US Federal Communications Commission, but said it would continue its efforts to gain anti-trust approval from the US Department of Justice
The Justice Department says the buyout of the Deutsche Telekom-owned company could have a damaging effect on competition and jobs numbers within the mobile telecommunications industry.
AT&T issued a statement Thursday saying: "AT&T Inc and Deutsche Telekom AG are continuing to pursue the sale of Deutsche Telekom's US wireless assets to AT&T”.
The DOJ and the FCC are both against the deal, which would see the second-largest and the fourth-largest US wireless carriers join forces, cutting back the number of national carriers to three. "The record clearly shows that, in no uncertain terms, this merger would result in a massive loss of US jobs and investment,” a top official from the FCC told Reuters Thursday.
The FCC will have to approve AT&T’s application withdrawal and can also impose conditions on new merger applications between the two companies in the future.
AT&T and Deutsche Telekom said they would bring their application back to the FCC if the Justice Department approves the acquisition.
If the deal falls through it would be a huge setback for AT&T, which offered a massive $4 billion break-up fee in March to bring Deutsche Telekom on board.
Industry analysts Espirito Santo said AT&T’s $4 billion accounting charge was a clear indication the company’s hopes of winning anti-trust approval were dwindling.
"AT&T may decide to walk away at the first opportunity (March 20, 2012) rather than waiting for the ultimate September 20, 2012 deadline," Espirito Santo communicated to clients.
The DOJ has brought court proceedings to block the acquisition, with the hearing set to get underway on February 13. If the merger gains approval, the FCC will then have its chance to argue that consumers will suffer from higher prices and job numbers will fall.
Contrary to the FCC’s premise, AT&T said the deal between the two companies could create tens of thousands of new jobs, even promising to relocate 5,000 overseas jobs back to the US.
AT&T employs around 260,000 staff, with a further 36,000 at Deutsche Telekom’s US offices.
Key Statistics – Global Wireless Telecommunications Industry (source: MarketLine)
- In 2010, the global wireless telecommunications services industry saw revenue of $890 billion, growing at an annual rate of 8.8% from 2006.
- Between 2006 and 2010, market consumption levels grew at an annual rate of nearly 16% to reach over 4.08 billion subscribers.
- The industry is expected to slow between 2010 and 2015, with annual growth levels falling to 7.5%, which will push the market value up to $1.28 trillion by the end of 2015.