AT&T drops $39B T-Mobile bid

AT&T Inc. is hanging up on its $39 billion bid to buy smaller wireless provider T-Mobile USA, nearly four months after the U.S. government raised concerns that it would raise prices, reduce innovation and give customers fewer choices.

The long-expected announcement left AT&T grumbling about a shortage of airwaves to expand its services, while scrappy competitor T-Mobile remains up for sale by German parent Deutsche Telekom.

The formal end of the deal was heralded by critics. No. 3 carrier Sprint Nextel Corp. had feared "an undeniable duopoly" between the proposed new entity and current leader Verizon Wireless. The two companies would have controlled almost 80 percent of the cellphone market had the deal gone through.

Sanford Bernstein analyst Craig Moffett said the announcement was "a bit of an anticlimax."

"This is like receiving the divorce papers for a couple that's been separated for years," he said.

AT&T's purchase of fourth-ranked T-Mobile, announced in March, would have made it the largest cellphone company in the U.S. AT&T is now the second-largest wireless carrier, with more than 100 million subscribers, behind Verizon Wireless, with 108 million. Sprint has 53 million, followed by T-Mobile at 34 million.

T-Mobile endured without much investment from its parent company and without the highest-end devices such as Apple Inc.'s iPhone. It offered value packages to customers who brought phones from other carriers. Regulators feared the loss of T-Mobile as a competitor would hurt consumers.

AT&T will now have to pay Deutsche Telekom $3 billion in cash as a breakup fee and give it about $1 billion worth of airwaves, known as spectrum, that AT&T doesn't need for the continued rollout of its high-speed "4G" network.

It will also enter into a roaming agreement with Deutsche Telekom so that AT&T's and T-Mobile's customers can use each other's networks.

AT&T will take an accounting charge of $4 billion in the current quarter.

The company said the deal would have solved that problem for a time, and without it, "customers will be harmed and needed investment will be stifled."

AT&T said it will continue to invest, and it called on the government to quickly approve its purchase of unused spectrum from Qualcomm Inc. and come up with legislation to meet the nation's long-term needs.

Besides such an auction, AT&T could also buy spectrum from satellite TV operator Dish Network Corp., which could require an FCC waiver because it is licensed for satellite use.

Besides missing out on many of the hottest smartphones, T-Mobile has stuck to updating its existing 3G network to achieve 4G speeds.

By contrast, competitors have moved to all-new networks that use LTE, or long-term evolution, technology specifically designed to carry data. Both AT&T and Verizon are building LTE networks, and Sprint intends to use the technology, too.

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