Deutsche Telekom and AT&T vowed Thursday to press ahead with the planned sale of the German company's T-Mobile USA unit to the U.S. cell phone operator despite concerns raised by American authorities.
Nevertheless, AT&T said it plans to take a pretax accounting charge of $4 billion in the current quarter to reflect the break-up fees that would be due to Deutsche Telekom if regulators block the deal.
The two companies said they had withdrawn applications to the Federal Communications Commission regarding the merger and intended to seek its approval again “as soon as practical.”
They took the step to consider “all options at the FCC and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice,” which filed a lawsuit in August to stop the deal, AT&T said in a statement.
“Both companies are continuing to pursue the sale of T-Mobile USA to AT&T,” Deutsche Telekom stressed.
Both U.S. agencies worry that the deal would hamper competition and lead to higher prices for consumers.
The decision is at least a partial victory for Sprint Nextel Corp. and its executives, who have battled the proposed merger from the start as a threat to competition, innovation and consumers. CEO Dan Hesse has said it would create a duopoly between AT&T and Verizon in the market for customers who sign a two-year service contract. Contract customers generate more revenue than those that buy service month to month.
Sprint officials could not be reached Thursday.
Overland Park-based Sprint had been considered the most likely suitor for T-Mobile before the surprising March merger announcement. Reports of talks were never confirmed and there were significant technical issues a merger of the two smaller firms would raise.
Since then, Sprint has began a $4 billion to $5 billion network upgrade and gained the iPhone to offer customers, both of which could impact its potential interest in T-Mobile.
T-Mobile’s independence also would restore its role as an ally in Sprint’s battle for lower access fees. The access allow wireless calls to travel the “last mile” from the networks of smaller carriers such as Sprint and T-Mobile to AT&T's or Verizon's switching stations to complete calls.
Deutsche Telekom AG and AT&T Inc. made their move after the chairman of the FCC earlier this week came out against the merger.
Julius Genachowski made his position known in a document he circulated to fellow commissioners Tuesday.
He recommended sending AT&T's proposed $39 billion takeover of T-Mobile to an administrative law judge for review and a hearing. That's what the FCC does when it opposes a merger.
In a research note Thursday, Jefferies International analyst Ulrich Rathe said the withdrawal of the FCC application, as well as the opposition by the Justice Department, indicate that “the companies are already well into working out a new version of the deal.”
The analyst, who rates Deutsche Telekom “Buy,” said the charge confirms the break-up fee will be difficult for AT&T to avoid if the deal is not completed.
In Frankfurt, Deutsche Telekom shares closed down 0.6 percent Thursday at (euro) 8.69 ($11.67), almost mirroring the 0.5 percent decline in the DAX index of blue-chip stocks.
The proposed deal, announced in March, would vault the combination of America's No. 2 carrier AT&T and No. 4 T-Mobile into the top spot ahead of Verizon.
Dallas-based AT&T has about 101 million wireless subscribers. T-Mobile, the Bellevue, Washington-based subsidiary of Deutsche Telekom AG of Germany, has 34 million.
Verizon Wireless, a joint venture between Verizon Communications Inc. and Vodafone Group PLC, has about 108 million, while Sprint Nextel Corp. has 53 million.