LOS ANGELES | AT&T; Inc. is hanging up on its $39 billion bid to buy smaller wireless provider T-Mobile USA, nearly four months after the U.S. government raised concerns that it would raise prices, reduce innovation and give customers fewer choices.
The formal end of the deal was heralded by critics. No. 3 carrier Sprint Nextel Corp. had feared “an undeniable duopoly” between the proposed new entity and current leader Verizon Wireless. The two companies would have controlled over almost 80 percent of the cellphone market had the deal gone through.
“This result is a victory for the millions of Americans who use mobile wireless telecommunications services,” Deputy U.S. Attorney General James Cole said. “A significant competitor remains in the marketplace and consumers will benefit from a quick resolution.”
The Justice Department sued on Aug. 31 to block the merger, and the Federal Communications Commission’s chairman came out against it last month. That prompted the companies to withdraw their FCC application while they strategized their next move.
Sanford Bernstein analyst Craig Moffett said the announcement was “a bit of an anticlimax.”
“This is like receiving the divorce papers for a couple that’s been separated for years,” he said.
AT&T’s purchase of fourth-ranked T-Mobile, announced in March, would have made it the largest cellphone company in the U.S. AT&T is now the second-largest wireless carrier, with more than 100 million subscribers, behind Verizon Wireless, with 108 million. Sprint has 53 million, followed by T-Mobile at 34 million.
T-Mobile endured without much investment from its parent company and without the highest-end devices such as Apple Inc.’s iPhone. It offered value packages to customers who brought phones from other carriers. Regulators feared the loss of T-Mobile as a competitor would hurt consumers.
AT&T will now have to pay Deutsche Telekom $3 billion in cash as a breakup fee and give it about $1 billion worth of airwaves, known as spectrum, that AT&T doesn’t need for the continued rollout of its high-speed “4G” network.
AT&T will take an accounting charge of $4 billion in the current quarter.
In pulling out, AT&T said the government’s attempts to block the deal do not change the challenges of the wireless phone industry. Cellphone companies have been clamoring for more airwaves to meet growing demand for faster downloads on smartphones and tablet computers.
The company said the deal would have solved that problem for a time, and without it, “customers will be harmed and needed investment will be stifled.”
AT&T said it will continue to invest, and it called on the government to quickly approve its purchase of unused spectrum from Qualcomm Inc. and come up with legislation to meet the nation’s long-term needs.