The prospect that AT&T's agreed takeover of T-Mobile USA would be blocked by regulators became even more likely yesterday after it emerged that the US telecoms giant is taking a $4bn (£2.6bn) charge to cover the cost of the deal's collapse.
In a statement rushed out yesterday on the Thanksgiving bank holiday in the US, AT&T said the charge – of $3bn in cash and $1bn in spectrum – amounted to the so-called break payment which it had agreed to make to T-Mobile owner Deutsche Telekom if the deal is unable to secure regulatory approval.
Despite a vigorous challenge from the US Justice Department (DoJ) on competition grounds, AT&T and Deutsche had refused to acknowledge any possibility that the deal might be blocked.
However, AT&T conceded it was "reviewing all options" after the Federal Communications Commission (FCC) regulator opposed the takeover on Tuesday and referred it to the courts.
The next day, AT&T and Deutsche withdrew their application to the FCC to concentrate on getting DoJ clearance, in which case they would make a fresh approach.
Will Draper, an analyst at Espirito Santo, said the announcement had reduced the chances of the deal happening from about 25 per cent to just 10 per cent.
"This [charge] tells us three things, all of them negative for Deutsche Telekom. It says that AT&T's own assessment of the chances of the deal succeeding have fallen – causing its auditors to force the company to take the charge," Mr Draper said.
"It tells us something about timing, too – suggesting that AT&T may decide to walk away at the first opportunity [in March 2012] rather than waiting for the ultimate 20 September 2012 deadline," he added.
"And it tells us that the valuation of the spectrum and roaming rights may be less than the market."
The DoJ sued to block the transaction in August, arguing that it would eliminate one of four national US wireless carriers and reduce competition.
AT&T said yesterday that its withdrawal of the FCC application – and the $4bn charge – were taken 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".
Combining AT&T and T-Mobile, the second- and fourth-biggest US wireless providers, would create a new market leader with 134 million customers, that would dethrone Verizon Wireless. Deutsche Telekom entered the US market a decade ago.