AT&T, T-Mobile Preps For $4B Break-up Fee

Earlier this week FCC Chairman Julius Genachowski presented another hurdle towards the AT&T-T-Mobile merger when he announced that he plans to push for an administrative hearing to deter the deal.  Genachowski stated that over the months of scrutinizing the merger, he concluded that the merger would result to a massive loss of US jobs and investment, proving that the deal will not do any good for the welfare of the public.  The deal is also viewed as anticompetitive, as it will clearly crush AT&T’s rivals if it pushes through.

AT&T finally realized that they are fighting for a lost cause, as they withdrew their application from the FCC yesterday.

AT&T said it needed to withdraw its merger application at the FCC to “facilitate the consideration of all options at the FCC and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice.”

The company also added, “As soon as practical, AT&T Inc. and Deutsche Telekom AG intend to seek the necessary FCC approval.”

FCC & DOJ Gets Tough On Mergers

In April 20, 2009, Christine A. Varney was confirmed by the U.S. Senate as Assistant Attorney General for the Antitrust Division.  And in 2010, Varney, together with Genachowski, vowed to scrutinize mergers, making sure that deals aren’t anticompetitive as well as good for the public.

“The Obama administration has gotten much more aggressive in antitrust than the Bush administration was,” Jeffrey Jacobovitz, an antitrust litigator with McCarthy, Sweeney & Harkaway PC in Washington, said in an interview. “It’s a new dawn for merger enforcement.”

Genachowski was appointed by President Obama to look into wireless carriers and proposed mergers to scrutinize and examine unexpected and maybe hidden charges on monthly bills and contracts with handset makers.

AT&T-T-Mobile Break-Up

So what happens to AT&T and T-Mobile?  T-Mobile doesn’t have much to sulk about as they would get $4 billion in break-up fees from AT&T.  The penalty is broken down into $3 billion to be paid in cash and $1 billion in assets for the German firm.

According to a statement made by Deutsche Telekom, based in Germany, the withdrawal “is being undertaken by both companies to consolidate their strength and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice. As soon as practical, Deutsche Telekom and AT&T intend to seek necessary F.C.C. approval.”

The companies haven’t really abandoned the merger plan, though AT&T withdrew the FCC application.  They just want to better prepare for all the hurdles laid out on the track for them.  But with AT&T readying the $4 billion break-up fee, it seems like the company is already accepting defeat.