AT&T appears to be willing to do anything to salvage its plan to acquire T-Mobile USA, despite the roadblocks being thrown in its way by the government.
Over the holiday weekend AT&T tried pull a fast one on the Federal Communications Commission, it would seem. In the early morning hours of Thanksgiving, AT&T announced that it had withdrawn its T-Mobile merger application from the FCC. The merger application requests that T-Mobile USA's licenses to operate and spectrum holdings be transferred to AT&T.
AT&T and Deutsche Telekom said they will instead focus on winning the lawsuit levied against them by the Department of Justice.
"AT&T and Deutsche Telekom 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, either through the litigation pending before the United States District Court for the District of Columbia, or alternate means," said the companies in a press statement.
In the same press release, however, AT&T said that it is going to take a $4 billion charge in the fourth quarter of the year. Why is it writing down that much money? It is preparing for the breakup fee it will have to pay Deutsche Telekom / T-Mobile USA if the deal falls apart, which amounts to about $6 billion in cash and spectrum assets.
AT&T insists that the move is being made so that the company can regroup and resubmit a new proposal. AT&T says that it filed this paperwork with the FCC before the FCC said it would refer the matter to an administrative law judge. The FCC sees the paperwork withdrawal as a "request" that it "will consider."
On Friday, AT&T's legal team bristled at the FCC's response.
"We have every right to withdraw our merger from the FCC, and the FCC has no right to stop us," said AT&T general counsel Wayne Watts in a statement. "Any suggestion the agency might do otherwise would be an abuse of procedure which we would immediately challenge in court."
AT&T believes that by withdrawing its paperwork, it preempts the FCC's attempt to send the merger paperwork before a judge. Is there something in that paperwork that AT&T doesn't want to become public? It would seem so.
It would also seem that AT&T is willing to make some major concessions in order to make the deal go through. Speaking to Bloomberg, a source cited as "familiar with AT&T's plans" suggests that AT&T would be willing to divest up to 40% of T-Mobile USA assets in order to help the deal gain regulatory approval.
While divestitures are part-and-parcel for acquisitions in the telecom space, it doesn't make much sense in this case. AT&T has stated repeatedly that it is making this acquisition to gain T-Mobile USA's spectrum assets. AT&T said that it won't be able to expand its LTE network to cover 97% of Americans (as planned) without T-Mobile's spectrum.
How is that going to work if it only buys 60% of T-Mobile?
AT&T is desperate, and it is showing.
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