The two companies would have controlled almost 80 percent of the cell-phone market had the deal gone through.
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 voiced concerns that it would raise prices, reduce innovation, and give schools and other 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 wireless carrier Sprint Nextel Corp. had feared “an undeniable duopoly” between the proposed new entity and current market leader Verizon Wireless. The two companies would have controlled almost 80 percent of the cell-phone market had the deal gone through.
“This result is a victory for the millions of Americans who use mobile wireless telecommunications services,” Deputy U.S. Attorney General James Cole said. “A significant competitor remains in the marketplace, and consumers will benefit from a quick resolution.”
The Justice Department had sued on Aug. 31 to block the merger, and the Federal Communications Commission’s chairman came out against it last month. That prompted the companies to withdraw their FCC application while they strategized their next move.
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 cell-phone 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 has 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 now will 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 also will enter into a roaming agreement with Deutsche Telekom so that AT&T’s and T-Mobile’s customers can use each other’s networks.
In pulling out, AT&T said the government’s attempts to block the deal do not change the challenges of the wireless phone industry. Cell-phone companies have been clamoring for more airwaves to meet growing demand for faster downloads on smart phones and tablet computers.