Network operator AT&T said it expects to recognize a pretax accounting charge of $4 billion ($3 billion cash and $1 billion book value of spectrum) in the fourth quarter of 2011 to reflect the potential breakup fees due to Deutsche Telekom in the event the proposed acquisition of the company's American arm, T-Mobile USA, does not receive regulatory approval from the Federal Communications Commission. A decision by the full commission is expected in the coming weeks.
Following the announcement by the FCC on Nov. 22 that it is circulating a proposed order that would designate the sale of T-Mobile USA to AT&T for hearing, both Deutsche Telekom and AT&T withdrew the pending applications regarding the sale of T-Mobile USA. Both companies said they are continuing to pursue the sale of T-Mobile USA to AT&T.
"The FCC's action today is disappointing. It is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the U.S. economy desperately needs both," said Larry Solomon, AT&T's senior vice president of corporate communications. "At this time, we are reviewing all options."
The step 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, Deutsche Telekom announced. As soon as practical, Deutsche Telekom and AT&T intend to seek the necessary FCC approval. In addition, AT&T has announced it expects to recognize a pretax accounting charge to reflect the potential breakup fees due to Deutsche Telekom in the event that the transaction does not receive regulatory approval.
"AT&T Inc. and Deutsche Telekom AG are continuing to pursue the sale of Deutsche Telekom's U.S. wireless assets to AT&T and are taking this step 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," AT&T said in a prepared statement.
According to FCC officials familiar with the staff analysis of more than 200,000 pages of documents, 100 meetings with interested parties, 30 meetings with the applicants and 50 petitions to deny, the staff has concluded that the proposed merger would significantly diminish competition by an amount they said would be "unprecedented."