The AT&T T-Mobile Deal Is Officially Dead

AT&T said today it was abandoning its plan to acquire T-Mobile.

In a statement, AT&T said it had agreed with Deutsche Telekom, T-Mobile’s owner to end its bid to buy the company for $39 billion. AT&T said it had thoroughly reviewed all its options ? which amounted to pressing ahead with its proposal against antagonistic government regulators and a wary public, trying to breathe life into stalled talks with third parties to revamp the deal, or killing it entirely ? and decided simply to trash the original plan.

AT&T’s decision forces the company to pay T-Mobile $4 billion in a “break up” fee that was agreed upon when the deal was first struck. AT&T said it would add the charge to its fourth quarter financials for the 2011 fiscal year. It also said it was entering a “mutually beneficial” roaming agreement with Deutsche Telekom.

AT&T says the termination of the deal would harm consumers since the merger would have been an “interim solution” to the shortage of wireless spectrum. Spectrum is the lifeblood of the wireless industry, and all carriers want to acquire more or have the government open additional parts of the public airwaves for auction.

“To meet the needs of our customers, we will continue to invest,” said Randall Stephenson, AT&T chairman and CEO, in the statement. “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 U.S. wireless industry, including expeditiously approving our acquisition of unused Qualcomm spectrum currently pending before the FCC. Second, policymakers should enact legislation to meet our nation’s longer-term spectrum needs.”

The FCC began the recent chain of events that led to the deal’s downfall when it concluded the acquisition would diminish competition and recommended a hearing in front of an administrative law judge. Reacting to AT&T’s official scuttling of the deal, FCC Chairman Julius Genachowski issued the following statement:

“The FCC is committed to ensuring a competitive mobile marketplace that drives innovation and investment, creates jobs and benefits consumers. This deal would have done the opposite. The U.S. mobile industry leads the world in mobile innovation, and we agree with AT&T that Congress should pass incentive auction legislation that will unleash new spectrum for mobile broadband.”

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