AT&T-T-Mobile Merger Officially Dead

The deal is dead.

Facing heavy government opposition to a $39 billion merger, AT&T Inc. on Monday announced an end to its bid to acquire T-Mobile USA from Germany’s Deutsche Telekom AG.

AT&T, the second-largest U.S. wireless provider, has decided to walk away from the deal nine months after the controversial merger was announced.

For months, Dallas-based AT&T has faced an uphill battle gaining authority to merge with Bellevue, Wash.-based T-Mobile USA  the nation’s fourth-largest wireless provider  because the U.S. Department of Justice sued to block the merger on the basis that the deal was anticompetitive. The Federal Communications Commission also has opposed a merger that the agency’s staff concluded would not be in the public interest.

AT&T has maintained for several months that the merger would have enabled it to ease a looming shortage of spectrum and would not have significantly harmed competition in the U.S. wireless market.

“The actions by the Federal Communications Commission and the Department of Justice to block this transaction do not change the realities of the U.S. wireless industry. It is one of the most fiercely competitive industries in the world, with a mounting need for more spectrum that has not diminished and must be addressed immediately,” AT&T said Monday. “The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage. In the absence of such steps, customers will be harmed and needed investment will be stifled.”

As a result of the breakup, AT&T will incur a pretax accounting charge of $4 billion in the fourth quarter of 2011. Dallas-based AT&T also announced plans to “enter a mutually beneficial roaming agreement with Deutsche Telekom.”

The news raises many questions concerning the fate of T-Mobile USA, which has struggled to compete with its larger rivals for several quarters and is owned by a company that wants to focus its investments on its European operations.

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