AT&T and Deutsche Telekom recently withdrew their application with the Federal Communications Commission for approval of the proposed AT&T acquisition of T-Mobile USA. 

?If the deal did not go through, it would probably, in the short term, continue to mean greater competition in the GSM segment of the U.S. handset market,? said Ross Rubin, executive director, industry analysis at The NPD Group, Port Washington, NY.

?There would continue to be more exclusives for T-Mobile,? he said. ?There would be a wider range of handsets, in particular handsets that supported T-Mobile?s AWS spectrum at that AT&T would plan to redeploy for LTE at some point.

?The competition would be greater as long as T-Mobile remained an independent carrier. This changes if T-Mobile were acquired by a company that is presently not in the wireless business, such as a cable entity like Comcast, or a satellite TV provider such as Dish.?

Spectrum analysis
AT&T withdrew its FCC application following a request from  the FCC for a hearing to determine why the deal is in the public?s interest, putting the burden of proof on AT&T to prove that the deal is in the public?s interest.

AT&T and Deutsche Telekom said they will seek the necessary FCC approval as soon as it is practical and are taking this step to consider all of their options at the FCC. The companies also said they are continuing to pursue the merger and want to focus their efforts on obtaining antitrust clearance for the transaction from the Department of Justice.

A DOJ hearing is scheduled for February 2012 to determine if the deal meets antitrust laws.

If the deal does not go through, Sprint has also been named as a possible T-Mobile suitor.

?Since the AT&T, T-Mobile merger was announced, Sprint has publicly committed to rolling out LTE,? Mr. Ross said. ?If Sprint and T-Mobile were to merge - there was a fair amount of speculation that Sprint was interested in merging with T-Mobile prior to the announcement of the AT&T deal - then T-Mobile spectrum would become yet another band on which Sprint might deploy LTE.?

Regional strength
AT&T may be considering concessions that would allow the merger to go through, such as selling off spectrum.

In this scenario, some of the smaller carriers such as MetroPCS and Leap Wireless could scoop up a lot of the newly available spectrum. Such a move could make them more competitive in the handset space.

?When Cox shut down its wireless service, one of the statements it made was that it was very difficult to compete with AT&T and Verizon because it could not get access to the kinds of handsets that those large carriers could gain access to,? Mr. Rubin said. ?This is challenge that some of the smaller regional carriers face as well.

?In general, they don?t have the market power to land a signature device that is going to attract a lot of attention and interest,? he said. ?Even if some of the T-Mobile customers would be transferred to a small region player, it would not get them up to the level where they would be competing with the two largest players in the U.S.?

A loss of confidence
There are several reasons why AT&T might have decided to withdraw the FCC application, including that it wants to change some of the terms of the application and refile. The company could also be thinking that the deal is not going to go through and does not want to reveal the details that would be included in such a filing.

In either case, the withdrawal suggests AT&T is no longer as confident that the deal will go through as it was when it was originally announced earlier this year.

?It says that they are starting to see some of the odds stacked against them and realize that something has to change if they have any hope of the deal going through,? said Carl Howe, research director at Yankee Group, Boston.

?We ran the numbers and if the threshold for market penetration to meet antitrust guidelines is x, the actual concentration in this deal is ten times that,? he said. ?I would be surprised if any divestiture model is really going to pass muster.?

By withdrawing its FCC application, AT&T is avoiding a time consuming FCC trial.

The company may be working to get a deal done that DOJ will accept before going back to the FCC.

?AT&T management assumed it would be as easy to get approval as under the Bush administration and did not come in with a humble plan to satisfy the regulators,? said Susan Rudd, director of service provider analysis at Strategy Analytics, Boston.

?They are now taking stock, adjusting and coming up with conciliatory plan to actually ensure real competition,? she said.

?My guess is still they will have to divest significant spectrum to MetroPCS and Leap Wireless to create new strong national fourth and fifth players in the U.S. focused on low-end and prepaid users.?

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York