A federal judge may decide to delay a critical antitrust trial long enough… (Danny Moloshok, Reuters )
AT&T's battered $39-billion deal to take over T-Mobile is a step closer to collapsing, leaving AT&T stuck with what could be a very large bill.
A federal judge is expected to make a ruling next week that could delay a critical antitrust trial long enough to derail the deal.
If the companies do not complete the transaction, which would create the nation's largest wireless carrier, AT&T will be contractually required to pay a $4-billion breakup fee to T-Mobile.
Two weeks ago, AT&T withdrew its merger application from the Federal Communications Commission when the agency's chairman said the merger could harm consumers by leading to higher prices and a less competitive wireless industry.
AT&T said it would focus on overcoming an antitrust lawsuit filed by the Justice Department in hopes that a court victory would help mitigate FCC objections.
But because AT&T was no longer formally trying for FCC approval, Justice Department attorneys argued Friday, the deal was "not a real transaction" and therefore not worth litigating.
If U.S. District Judge Ellen Huvelle agrees to indefinitely postpone or dismiss the case, it could leave the companies with few options, analysts said.
"It could, practically speaking, be the death knell of that merger," said Bert Foer of the American Antitrust Institute, a nonpartisan consumer advocacy organization that has opposed the deal. "It's a strategically complicated mess, and the way out of the mess is for this merger to go away."
AT&T's general counsel, Wayne Watts, said in a statement that the company remained eager to present its case in court.
The FCC's opposition to the deal, which would leave AT&T and Verizon controlling close to 75% of the wireless industry's customers — raised the likelihood that AT&T would have to alter the terms of its takeover bid to satisfy regulators that the deal would not harm competition.
But if the structure of the deal changed, then the Justice Department's lawsuit — built on the original terms — could wind up being moot.
"You could change the deal in a month and everybody's time will be wasted," Huvelle said Friday, according to reports from the hearing.
The merger began running into trouble in late August, when the Justice Department filed suit to block the deal, saying it would stymie wireless competition, lead to higher prices and eliminate jobs when the companies merged.
When the FCC later agreed that the merger was not in the public interest, the deal's prospects dimmed even further. Late last month, AT&T said it expected to take a pretax accounting charge of $4 billion this quarter "to reflect the potential breakup fees" it must pay to T-Mobile parent Deutsche Telekom if the deal doesn't get cleared.
"My best guess would be that the parties [don't] seriously believe that they're going to pull out anything like their original merger plan," said Christopher L. Sagers, a law professor at Cleveland State University who focuses on antitrust and business regulation.
Sagers said both companies were now trapped between two unpalatable options: fighting a long and costly battle for approval that they were unlikely to win, or abandon the merger — which would cost AT&T billions and leave T-Mobile back where it started: with a struggling business that was vulnerable to takeover.
"Were it not that they were both in a predicament, it'd be over already," Sagers said.