AT&T drops plan to buy T-Mobile

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AT&T said Monday it was abandoning its $39 billion effort to buy Deutsche Telekom's US cellphone carrier T-Mobile after US authorities moved to block the deal as anti-competitive.

AT&T said it would have to take a $4 billion charge for dropping the offer, first made in March, which would have propelled it past Verizon Wireless into first place in the US wireless market.

The decision came after the Department of Justice sued to prevent the takeover, saying it would further concentrate an industry already in the hands of just a few providers.

But AT&T said that without the deal, cellphone users would continue to face a shortage of airwaves.

The US wireless industry "is one of the most fiercely competitive industries in the world, with a mounting need for more spectrum that has not diminished and must be addressed immediately," AT&T said in a statement.

"The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage. In the absence of such steps, customers will be harmed and needed investment will be stifled."

The end of the deal leaves AT&T in second place in the US industry, and several billion dollars poorer: in its original contract with Deutsche Telekom, it promised to pay the German company $3 billion in cash if the deal fell through.

In addition, Deutsche Telekom said in a statement, AT&T has to provide T-Mobile USA -- the number-four provider -- a long-term deal on 3G roaming services "and a large package of mobile communications licenses."

Both the Justice Department and the Federal Communications Commission had strenuously opposed the deal. In a long review the FCC concluded that competition would have been significantly cut in 99 of the top 100 US wireless markets.

The Justice Department alleged in its suit that the takeover, which would have eliminated the T-Mobile brand, "would substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products."

AT&T last week suggested it was seeking to alter the deal to see if it could find some way to meet government objections, but in the end threw in the towel.

AT&T chairman and chief executive Randall Stephenson said in a statement that the company would continue to invest to improve and expand its network.

"However, adding capacity to meet these needs will require policymakers to do two things. First, in the near term, they should allow the free markets to work so that additional spectrum is available to meet the immediate needs of the US wireless industry."

"Second, policymakers should enact legislation to meet our nations longer-term spectrum needs."

© 2011 AFP

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