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.