AT&T's bid for T-Mobile turns to lump of coal

week in review Stared down by regulators, AT&T calls off the $39 billion wireless megamerger. Meanwhile, Google and Mozilla renew their partnership, and Apple notches legal win over HTC.

week in review Bowing to the objections of federal regulators, AT&T withdrew its $39 billion bid to acquire T-Mobile.

In August, the U.S. Department of Justice sued to block the merger. And in November the Federal Communications Commission indicated it opposed the merger as well. In both cases, the Justice Department and the FCC said that the merger between the second largest and fourth largest wireless phone companies in the U.S would harm competition. The FCC went as far as to say in its report of the merger that the deal would result in massive layoffs and would not be in the public interest.

While the dissolution of the deal seemed to leave AT&T without much-needed spectrum to keep up with demand for wireless data services -- at least until late yesterday, when the FCC gave the green light to AT&T's acquisition of 700MHz spectrum licenses from Qualcomm -- it will provide T-Mobile with the fruits of one of the largest breakup fees associated with any merger. The fee includes a cash payment to Deutsche Telekom of $3 billion, which is expected to be paid by the end of the year. It also includes a large package of mobile communications spectrum and a long-term agreement on UMTS roaming within the U.S. for T-Mobile USA, all of which is worth about $1 billion.

Even with the additional $3 billion in cash, which can be used to help pay down T-Mobile's debt, and the additional spectrum that will fill some holes in T-Mobile's network, there is no question the carrier is still in trouble . While other major carriers have been adding customers over the past year, T-Mobile has been losing them.
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