AT&T Calls Off T-Mobile Takeover

In a statement released Monday, the company said that after reviewing its options it has agreed with Deutsche Telekom, T-Mobile’s parent company, to end its plans for the merger.

AT&T lashed out at the Federal Communications Commission and Department of Justice in its statement, saying that the steps taken by the federal regulators to block the merger would harm consumers:

“The actions by the Federal Communications Commission and the Department of Justice to block this transaction do not change the realities of the U.S. wireless industry. It is one of the most fiercely competitive industries in the world, with a mounting need for more spectrum that has not diminished and must be addressed immediately. The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage. In the absence of such steps, customers will be harmed and needed investment will be stifled.”

AT&T’s acquisition of T-Mobile would have vaulted it ahead of Verizon as the number one mobile carrier in the U.S., but plans for the merger began to fall apart on August 31, when the Department of Justice sued to block the merger on anti-competitive grounds. The DOJ said in the suit that a combined AT&T and T-Mobile would result in higher prices and less innovation in the marketplace.

Other opponents to the T-Mobile takeover piled on, including competitors Sprint and C-Spire (formerly Cellular South), as did seven state attorneys general .

But the merger’s prospects for success began looking truly dismal when FCC chairman Julius Genachowski came out in opposition to the deal. The FCC then released a scathing report , which contradicted many of AT&T’s statements about the benefits of the merger.

AT&T chairman and CEO Randall Stevenson said in a statement that AT&T will continue to invest to meet customer needs, but called on policy makers to “allow free markets to work,” and to enact legislation that will address the looming spectrum crunch.

AT&T will have to pay Deutche Telekom a hefty break-up fee of $3 billion in cash, and said it will enter into a spectrum sharing agreement with T-Mobile. AT&T took a $4 billion pre-tax accounting charge to reflect the fee.