AT&T And T-Mobile Pull FCC Application For Deal, AT&T Records $4 Billion Pretax Loss

Late Wednesday night AT&T announced that it will take a $4 billion charge as opposition to its T-Mobile USA purchase grows. The charge will reflect $3 billion in cash and over $1 billion in spectrum AT&T will provide T-Mobile parent Deutsche Telekom if the deal fails to meet regulatory approval.

This move comes on top of both companies announcing the withdrawal of their pending applications from the Federal Communication Commission, although both parties said they will continue to fight for the deal.

“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,” the companies said in a statement. “As soon as practical, AT&T Inc. and Deutsche Telekom AG intend to seek the necessary FCC approval.”

This move does not mean both AT&T and Deutsche Telekom are waiving the white flag as they specifically stated they are “continuing to pursue the sale.” However, the news that AT&T is allowing for a $4 billion pretax charge on its fourth quarter of 2011 balance sheet is recognition this deal is at risk of not going through. In other words, AT&T’s accounting team is recognizing the deal is now more likely to fail than succeed.

Happy Thanksgiving!

Business Wire, Reuters

 

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  • Realcool2000

    All these fool talkin ” I want the I phone, diesel jeans and my range rover gas guzzeler so I can think I’m cool ”

    Make sure u hear the quote in ur heads with a whinney, self worthless voice.

  • MT3GS

    Thanks for the cash and the spectrum, AT&T, now we can prove we’re better than you and we can swallow your customers :) Happy thanksgiving everyone!!!!!!! Now start hiring more US-based support personnel and change the 611 menus so we can get a human faster!

    • Jcj1

      you do realize it goes to DT not T-Mobile

  • http://www.joshrobertnay.com Respawn

    Damn it, hurry up and deny the deal so I can wear my magenta spandex again. Sheesh!

    • Silk7412

      don’t forget the leg warmers!!

  • Anonymous

    “But obstacles are stacked against the firms. Genachowski said Tuesday
    that after an eight-month review, he found that combining AT&T and
    T-Mobile into the nation’s biggest wireless provider would harm the
    public by leading to job losses, as well as higher prices for cellphone
    users. He recommended sending the application to an administrative law
    judge for review, a step the agency takes when opposing a communications
    industry merger”

    I don’t see why DOJ decision would be different..

  • Jaygqitalia

    I will laugh if Sprint buys T-mobile and were stuck with that shitty company. Not really a monopoly then, but we would be able to compete better with ATT and Verizon

    • ItsMichaelNotMike

      That is NOT going to happen. The DOJ will oppose any of the top four carriers doing a deal with each other.

      The best way to understand this is that the DOJ’s arguments could apply to any of these carriers doing a deal. Remember, this has to do with consumer choice.

      Of course it did not help that the DOJ despises AT&T, one of the most anti-consumer companies in the Nation.

    • Anonymous

      T-MOBILE+SPRINT= FAIL

  • ItsMichaelNotMike

    Although I agree that there is every reason to be happy about this because AT&T deserves the shaft and everything it gets, remember what I said, and will keep saying.

    If you were against this deal because you love or like T-Mobile, when this deal fails, the T-Mobile you know and love will be gone within months of this deal officially going south.

    DT’s venture into U.S. wireless has been a disaster. It overpaid for the Company and then proceeded to make multiple bad decisions. Having got its ass whupped, DT intends to fold up its tent and leave U.S. shores.

    In regards to this deal, it was about money. DT hit the jackpot when AT&T stepped up with its $39 billion (to be sure it was only AT&T willing to pay that kind of money simply to take out a competitor).

    Now that the deal is up in flames DT will execute Plan B, which IMO is to liquidate TMOUS or sell it at a huge loss.

    As I said last year, TMOUS WAS worth about $15 billion on a good day, maybe $20 billion in a good economy. And now that TMOUS is damaged goods and hemorrhaging customers, DT will not find a buyer, at least not for the kind of money you think the Company is worth.

    I liken TMOUS to other companies who made major mistakes that resulted in those businesses eventually failing because they could not find a buyer (see Borders, Polaroid, and soon Kodak). What’s different here is that DT can afford to simply dump TMOUS on the cheap or liquidate it in pieces.

    Assume someone does buy the TMOUS operation. If that happens I predict the new owner will strip mine the business or convert TMOUS into a 100% prepaid carrier and immediately abandon the post-paid business model.

    All just my opinion. 

    • http://www.joshrobertnay.com Respawn

      You make some pretty valid points, and I’m not going to discredit what you say.

      I would like to mention, though, that T-Mobile is still profitable, so it’s not like it’s a sinking ship. In fact, the company has been adding subscribers (albeit, prepaid subs, but still not losing subs overall when combining postpaid losses with prepaid gains).

      Still, DT has been trying to get out of the U.S., but with the government looking to preserve the competition, I really see DT more than likely spinning T-Mobile off rather than trying to go through another sell. Let’s face it, the whole reason why T-Mobile is losing postpaid customers this bad to begin with is all this merger talk.

      Of course, we can only speculate at this point. DT IS getting a chunk of spectrum and cash from AT&T if the sale doesn’t go through, so they may yet be able to build out at least a partial LTE network. With HSPA+ being as good and fast as it is, I really don’t see why that would be necessary other than to bypass the areas where the army and other government agencies are (still) not moving off T-Mobile’s AWS. If it avoids the slowness of these agencies altogether, I’m all for it.

      • Justhanging

        I agree.  I think DT will look at this whole deal as having “made the pain of their initial investment a little less painful”.

        This is not like Boarders or Polaroid in a business model that was all but kaput.  DT has a viable business which would be a reasonable spin+merge candidate.

        Customers WILL come back to T-Mobile as the fear of merging with AT&T is gone….

        AND EITHER

        as ”Apple + Iphone” gets over itself and makes it a little easier/cheaper for a carrier to sell them

        OR

        when Android or WP are looked at as “close enough” options to an Iphone by those thinking they HAVE to have an Iphone.

        Personally, I think there is a big upside opportunity for T-Mobile to be one of Nokia’s buddy in the US market as the Nokia WPs come in earnest next year.  Now everybody can poo-poo that as “too late”.  But there are NUMERIOUS examples in technology where somebody coming later with decent products (and lots of capital to invest) can carve out a chunk of the pie for themselves.

        Nokia could be a part of T-Mobiles path to recovery of lost subscribers. 

    • BigMixxx

      I don’t agree with that liquidation part.  :-)

      Selling off t mobile at, now, would truly be a firesale and the only folks with enough free cash would be ATT and Verizon.  It’s a bad position for T mobile to be in, but EVEN WORSE for DT.  DT can’t stop the investment as it represents 25% of DT’s value.  The German Goverment Won’t like that and oberman wants to keep his job….

      It would be worth more to the German Gov’t and Blackstone to keep it together and spin it to a Blackstone and let them fund an IPO or something vs. selling it off in units.  T mobile could hold a debt load of half it’s value and still be worth 20 to 25 billion, and hold true to the market, if a good strategy was in place.

      The hopes are now on direction, marketing and near term planning.

    • Anonymous

      Analogizing TMO to Kodak is fatally flawed. Kodak was an old-guard American company that simply refused to acknowledge the digital revolution that was redefining the industry it dominated for years, insisting that variants on the processed-film model was going to remain photography’s core mode of operation. By the time someone, or anyone, at Kodak forced them to see the light of day and adapt, it was too late. TMO’s problem is that it is a poorly positioned competitor in a market with bigger, more brutal competitors that make entry into and participation the market exceedingly difficult. That’s what DT has realized. 

      ATT gladly offered to overpay for TMO’s presence in the US, and, quite amazingly, federal regulators here in the US recognized exactly what ATT’s motivations were — to purchase and eliminate a competitor. The operation of the market may well find the remnants of TMO absorbed by the other players in the industry, but a Kodak moment is isn’t. 

      The reality, however, is that TMO is a viable competitor, although it has some problems looking forward. Another communications company that might be willing to take a risk, and find a willing financier, might be able to do something creative with the company should DT really opt to spin it off or sell off the pieces. Beyond that, DT’s previously stated objective to not spend further in the US may be revisited with a grant of $4B in cash and spectrum.

    • Miro

      Tmobile’s profits are in the billions so ti’s not like they’re Sprint or bleeding money even with all the customers fleeing because of AT&T’s possible purchase

    • Realcool2000

      Mike, your predictions are worth as much as a 14 year old that was held back two years.

      First you where all saying the aquisition would go thru for sure and treating all the tmo customers like they where foster children where no where to go, then you say ur not even on tmo, ur on some way out carrier with an iphone with some cheap way of getting data that you rarely use.

      Now you’re trying to act like u have any idea what’s gonna happen like you’re some prediction specialist….

      Why don’t u just keep quite for ounce?

      • Tbyrne

        Didn’t you know? Mike and Randall are good buddies. Randall shares his inside info with Mike all the time.

  • TMoFan99

    This might mean a T-mobile iPhone soon :) Too bad I’m bailing the ship and switching to AT&T for a iPhone in a few days…

    • JBLMOBILEG1

      Why pay more for data? Unless you just have to have an iphone I would never switch to At&t for it. If you must get it I would recommend Verizon… or even Sprint if you want better rates…. keep in mind your coverage would be less with Sprint though.

    • Memograph

      Wow… enjoy your bad coverage, drop calls, over priced rates, slow data, cruel customer service, zero privacy and full time government monitoring…. After this news I’ll keep my 3 lines and add a third one… upgrade all my phones and enjoy my T-mobile..

    • Tbyrne

      I’d like to throw you a life preserver but……..I’m not giving Randall anything!!

    • VibrantKid

      and why not Sprint? oh because you like paying more for limited data =)

    • Ryan Dawald

      stupid iphone lover we dont care what u do……

  • Anonymous

    ITS ALRIGHT. THEY STILL GOT TIME TO ARGUE. ANYTHING CAN HAPPEN.

  • Guest

    AT&T should just pay out DT and end any talks of a merger now. As much as I like T-Mobile its a sinking ship. I talked to a customer service rep today about possibly canceling my out of contract line and taking it to another carrier. And all they said was ok, just have your new carrier port your number. No attempt at all to try to get me to stay. 

    • Tbyrne

      Suspicious at best.

    • Guest5

      If you wanna stay with T-Mobile then call them and talk to the loyalty department. I called today and said, I’m tired of seeing new customers and value plan customers get all the deals so I want a deal on either the Galaxy 2 or Amaze or I’d take my business to Verizon or Sprint and get the iPhone. They ended up giving me the Galaxy 2 for free and they’re also sending me a signal booster.

  • LI10UP

    Rumors are flying everywhere.

    If still a standalone, T-Mobile could sell and leaseback its towers
    for proceeds of as much as $3.5 billion, Moody’s notes, or it could
    reach a network-sharing deal with another operator, even AT&T.
    A
    sale to another company or an I.P.O. appear to be less likely
    possibilities.

    Moody’s puts the probability of a sale to another rival
    at 10 percent, saying that the No. 3 operator, Sprint, would have
    difficulty financing such a large transaction even it could pass
    regulatory muster, while smaller players lack the wherewithal to make a
    bid.

  • Kevinmarchibald

    Will be interesting to see how the FCC accepts AT&T’s application withdrawal request. Supposedly the FCC cannot deny the request, but it can accept the withdrawal with prejudice, meaning that AT&T couldn’t re-apply, which AT&T says it intends to do depending on the outcome of the DoJ case. I’m not counting out AT&T though; it has a lot of paid influence over American government. However, the recording of the pretax loss related to the buyout attempt makes me think AT&T is no longer confident it will get regulatory clearance.

    • http://profiles.yahoo.com/u/35HLVJSI34LMH5M274SCGWDZBY mike

      I really like what you had to say about the FCC accepting the Temporary 
      withdrawal with predjudice. Great point, I wonder if that will occur?

  • ItsMichaelNotMike

    Just in, from Bloomberg, 11/25/11 3:53 p.m. PST:

    “AT&T Inc is considering an offer to divest a significantly larger portion of assets than it had initially expected, in order to salvage its $39 billion deal to buy T-Mobile USA, Bloomberg reported citing a person familiar with the plan.

    Bloomberg said the exact size of the divestiture hasn’t been determined but reported it could be as
    much as 40 percent of T-Mobile USA’s assets.

    The divestiture is an attempt to address the concerns of the Justice Department, which sued to block the takeover on August 31 saying the deal would ‘substantially lessen competition’ in the wireless market, Bloomberg said.

    The proposed deal was dealt another blow on November 22, when the Federal Communications
    Commission’s chairman sought to have it sent to an administrative law judge for review.

    The asset-sale proposal, which could come as early as the next Justice Department hearing on November 30, might be the only remaining option if the second-largest U.S. wireless operator wants to avoid a lengthy court battle in its bid to become the country’s top mobile carrier, Bloomberg said.”

    More detail and excellent explanation of what is at stake, AT&T strategies, etc.:

    http://www.bloomberg.com/news/2011-11-25/at-t-said-to-plan-proposing-bigger-asset-sales-to-save-t-mobile-takeover.html

  • ItsMichaelNotMike

    Recall David in here informing readers about MetroPCS getting T-Mobile customers out of this controversy. Read in today’s Bloomberg story that “AT&T has been in discussions with MetroPCS and Leap Wireless to sell spectrum and customers as a way of propping up competition in the absence of T-Mobile.”

    Don’t worry folks, MetroPCS has the $250 LG Esteem (the same phone that Verizon calls the LG Revolution retails for $560) and just now the HTC Wildfire S. And there’s more HTC phones coming Metro’s way.

    I have to say, this deal is as big a drama as wireless can get. Compare the comments from when TMoNews first announced the acquisition to current circumstances. To go from a 90% chance of approval to 100% certainty of the deal tanking, who would have thought.