AT&T punts on T-Mobile purchase

AT&T waved the white flag of surrender to regulators and dropped its plans to acquire T-Mobile.

In a statement, AT&T said it agreed with Deutsche Telekom to drop plans to buy T-Mobile. The Federal Communications Commission and the Department of Justice were against the deal.

AT&T CEO Randall Stephenson maintained that the rationale for the deal made sense. AT&T had argued that it needed T-Mobile to boost its network. Regulators, however, panned the deal. Stephenson said:

To meet the needs of our customers, we will continue to invest. 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.

As a consolation prize, Deutsche Telekom will get a $4 billion breakup fee. Deutsche Telekom and AT&T also entered a roaming agreement.

The end of the T-Mobile deal presents a spectrum conundrum for AT&T. The company argued that the T-Mobile deal would give it more network coverage. While regulators were jousting with AT&T, Verizon picked up spectrum from a bevy of cable companies. Verizon's move was designed to squeeze AT&T should the T-Mobile deal fall apart.

Without a deal, AT&T and T-Mobile are the weakest of the field in terms of wireless spectrum.