AT&T Dropping Its T-Mobile Bid, Owes Billions to Deutsche Telekom

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AT&T said Monday that it is dropping its $39 billion acquisition of T-Mobile USA, amid regulatory opposition from both the Federal Communications Commission and the Department of Justice, both of which had made moves to block the deal.

In a statement, AT&T said it had made the move after consulting with T-Mobile parent Deutsche Telekom, and criticized the actions that forced it to abandon the deal.

"The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage," AT&T said. "In the absence of such steps, customers will be harmed and needed investment will be stifled."

In addition to federal regulators, Sprint had vehemently opposed the deal, as had other smaller competitors and public interest groups, arguing it would hurt competition.

AT&T will have to pay a giant breakup fee to Deutsche Telekom, as well as enter into an expanded roaming agreement. AT&T said it would take a $4 billion charge in the fourth quarter to account for the cash and spectrum owed to the German telecommunications firm. The charge reflects $3 billion in cash and the $1 billion book value of spectrum owed, though many have placed the value of the spectrum at far more than its book value.

Despite the windfall, the move still leaves Deutsche Telekom without an exit plan for its U.S. holdings, and leaves T-Mobile without a clear path to offer higher-speed LTE service.

AT&T announced its plans to acquire T-Mobile back in March, on the eve of the CTIA trade show in Orlando. It drew almost immediate opposition from Sprint. The headwinds grew stronger as regulators began considering the deal and its potential impact on competition.

The companies had sought to see if there might be a way to offer concessions, but opponents seemed against any combination of the two, dimming the prospects for satisfactory concessions.

AT&T also failed on the political side, in addition to its regulatory chess moves. The company sought to withdraw its FCC application in hope of waiting for a court to rule on the Justice Department's move to block the deal. However, the court in that case decided that with no FCC application pending it had no need to move quickly.