AT&T and Deutsche Telekom's decision to withdraw their FCC merger application yesterday is a sign that the deal is dead in the water, analysts and industry agrees, with the final question not whether the acquisition goes ahead but how much pain each carrier suffers as it fails. Deutsche Telecom is expected to in effect sink T-Mobile USA rather than commit the investments the carrier needs in order to remain competitive in the US market, though the exact way in which the company would be shuttered is unclear.
T-Mobile USA could sell off its spectrum and network, but continue to operate with its existing userbase, analysts at Citi have suggested, in effect renting space on AT&T's combined network, Reuters reports. However, because the carrier has expected the deal to go through, little effort is believed to have been expended on winning new custom or securing new devices; that, the NYTimes reports, would leave T-Mobile USA floundering in the market, albeit a potential new target for external investor groups lured in by the $1bn-worth of AT&T spectrum the carrier would be forced to hand over as part of the break clause.
An alternative route might be selling to Sprint, though the incompatibilities of the two networks - and the fact that the third-largest carrier is already struggling with its own financial uncertainties - means the purchase price would likely be considerably lower than Deutsche Telekom has been expecting from AT&T. T-Mobile USA could be spun off as a completely separate entity, though again it would likely struggle to stand on its own feet.
However, if the FCC decided it really wanted to stick the knife in the merger's chances, experts suggest, it could refuse to accept AT&T and Deutsche Telekom's withdrawal request. In denying it, both companies would be forced to continue through the process - including the judicial hearing threatened earlier this month - an expensive process likely to end in tears. Alternatively, it could grant their request but do so with prejudice, preventing the companies from re-filing the application at a later date.