AT&T and Deutsche Telekom have withdrawn their applications to the FCC for approval of AT&T’s proposed US$39bn acquisition of T-Mobile USA. The move is a reaction to the decision by FCC chairman Julius Genachowski earlier this week, to ask for a legal…
AT&T and Deutsche Telekom have withdrawn their applications to the FCC for approval of AT&T’s proposed US$39bn acquisition of T-Mobile USA. The move is a reaction to the decision by FCC chairman Julius Genachowski earlier this week, to ask for a legal review of the deal. Genachowski’s request was widely seen as a major blow to the deal.
In a statement released this morning [Thursday], the companies said that they withdrew their applications without prejudice yesterday, but that they are continuing to pursue the merger.
The move helps the companies to focus their efforts on the ongoing DoJ antitrust investigation, which is subject to a separate judicial review.
“As soon as practical, AT&T Inc. and Deutsche Telekom AG intend to seek the necessary FCC approval,” the companies said in a statement.
AT&T also decided to book a US$ 4bn pretax charge this quarter, which reflects the potential break-up fee should the deal not receive regulatory clearance.
In a report yesterday, before the statement was released, Moody’s said that if the deal did not proceed, the operational and financial risks are greater for Deutsche Telekom than they are for AT&T.
“Should the sale not proceed, Moody’s believes Deutsche Telekom would rather exit the US market altogether as the options open to Deutsche Telekom if it were to stay in the US market are much less palatable than if it were to exit,” said Carlos Winzer, SVP and telecoms specialist at Moody’s.
The news from the companies comes after the FCC chairman asked on Tuesday for an administrative law judge review of the proposed takeover.
This followed lawsuits being filed against the deal earlier in the year by the Department of Justice, Sprint Nextel and Cellular South (now known as C Spire Wireless).
Speaking before the latest announcement from the companies, a senior partner at Axinn Veltrop & Harkrider LLP, Stephen Axinn, had told TelecomFinance that one strategy for the parties would be “to push ahead with the antitrust trial, now set for February, and hope that they can win it convincingly which would then give them ammunition to seek to dismiss the FCC administrative hearing process”.
“Administrative review by the FCC is typically a ‘deal-killer’,” Axinn said. “In the few instances where it has actually occurred, it has taken more than one year and sometimes much longer”.
Much now rests on the Department of Justice’s lawsuit seeking to block the deal, according to Andrew Lipman, partner at Bingham McCutchen. “If AT&T were to win the Justice lawsuit [against the DoJ], they would have a strong case for settlement with […] the FCC,” he said.
Lipman noted that, even if Judge Ellen Segal Huvelle were to rule against AT&T in the DoJ case, AT&T may still be able (through an expedited hearing) to get an appeal heard on the deal before the deadline for the deal to be completed (20 September 2012).
It could then restart the application process with the FCC.
Yet Lipman concluded that it was “more likely than not” that the government would prevail in the case against AT&T.
