Paul Sakuma, Associated Press
WASHINGTON — AT&T and T-Mobile USA appeared to edge closer to scrapping their proposed merger, saying Thursday that they had withdrawn their application to the Federal Communications Commission to join their cellular phone operations.
Deutsche Telekom, the parent of T-Mobile, and AT&T said in a joint statement that they still intended to pursue the $39 billion merger and would prepare for a federal antitrust lawsuit that is seeking to block the deal.
But the companies also said that AT&T planned to take a $4 billion charge against earnings to reflect the potential breakup fees that AT&T would have to pay Deutsche Telekom if the deal failed to go through.
The actions followed the decision earlier this week by Julius Genachowski, the FCC chairman, that the merger did not meet the commission's standard for approval. Genachowski sent other commissioners a proposed order to refer the case to an administrative law judge, the first step toward a commission move to block the deal, which would combine the second- and fourth-largest cellphone carriers in the U.S.
The application withdrawal appears in part designed to prevent the FCC from making public AT&T and T-Mobile records about the potential effects of the merger, records that could then be used by the Justice Department in the antitrust trial.
The companies have maintained publicly that the deal would not lessen competition and that it would create jobs in the U.S. But the Justice Department has said that the merger would severely restrict competition, and FCC officials have said that AT&T's confidential filings indicate the merger would eliminate jobs.
The withdrawal of the FCC application "is a tacit acknowledgment by AT&T that this story is all but over," said Craig Moffett, an analyst at Sanford C. Bernstein. "The fat lady hasn't started singing yet, but she's holding the mike and the band is about to play."
The efforts by the Justice Department's antitrust division and the FCC to block the merger reflect a reinvigoration of federal efforts to rein in excessive business practices after a prolonged period of deregulation that preceded the 2008 financial crisis.
President Barack Obama came into office pledging to take a harder look at the antitrust implications of proposed mergers, but the Justice Department was criticized by consumer groups in its first year for appearing hesitant to follow through on that promise.
Similarly, the FCC drew rebukes for its approval last year of the merger between Comcast and NBC Universal, which critics claimed would concentrate too much power over both television content and its transmission to consumers.
The move this week to conduct a hearing on the cellphone deal was the first time the FCC had done so on a merger since the 2002 proposed alliance between Echostar and DirecTV, which ultimately was scrapped.
In this case, however, AT&T has noted that expansion of the nation's Internet infrastructure is one of Obama's top goals to help rebuild the economy, and the FCC itself has predicted that its recent initiative to expand broadband Internet access to rural areas would create hundreds of thousands of jobs.
Consumer groups, which generally have opposed the merger, said this week's combined actions indicated that the deal was falling apart.
"The chances that AT&T will take over T-Mobile are almost gone," Gigi B. Sohn, president of the consumer group Public Knowledge, said in a statement. "While you can never count out AT&T entirely, the fact that they pulled their FCC application speaks volumes about the company's lack of confidence" in getting approval.
Deutsche Telekom, based in Germany, said in a statement that the withdrawal "is being undertaken by both companies to consolidate their strength and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice. As soon as practical, Deutsche Telekom and AT&T intend to seek necessary FCC approval."
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