Following months of opposition from government regulators, competitors and consumer advocates, AT&T threw in the towel yesterday and said it will drop its proposed merger with T-Mobile USA.

It has been suggested that AT&T may try to take a stake in T-Mobile USA or enter into some kind of joint venture now that the merger is dead. In a statement, AT&T said it will continue to invest in spectrum.

?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,? the statement said. ?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.

?The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage,? the statement said. ?In the absence of such steps, customers will be harmed and needed investment will be stifled.?

A $4 billion charge
AT&T will take a charge of $4 billion in the fourth quarter of 2011 and enter a mutually beneficial roaming agreement with Deutsche Telekom as a result of not completing the deal.

The news follows recent reports that AT&T had been unable to find any interested buyers for the spectrum it was looking to sell. Such a sale of spectrum was seen as crucial to AT&T being able to structure a deal that would be accepted by the Dept. of Justice and the Federal Communications Commission.

While details on what AT&T?s sale efforts might have entailed are not available it is widely thought that several smaller carriers such as MetroPCS and Leap Wireless were the most likely potential buyers.

However, either of these companies would have had trouble purchasing the spectrum at full price. Whether or not AT&T discounted the price to try to make a sale happened or promised any kind of financing is not known.

The proposed deal has been under attack almost from the beginning, with AT&T competitors as well as government regulators expressing concern that the deal would reduce competition and would not be good for consumers.

The loss of T-Mobile, which offers some of the more competitive pricing around, was seen as particularly problematic.
One of the issues that concerned regulators was just how much spectrum AT&T would have amassed as a result of this deal.

However, AT&T may now find itself at a competitive disadvantage because of recent deals by Verizon and Sprint to shore up spectrum, which Sprint accomplished via a deal with Clearwire while Verizon is expanding Advanced Wireless Spectrum through its acquisition of spectrum from Cox.

The company will also take a hit because of how the deal was originally structured, with Deutsche Telekom gaining $4 billion in cash and a roaming agreement.

After encountering resistance from the Federal Communications Commission and the Dept. of Justice for its $39 billion merger with T-Mobile USA, AT&T had recently been able to buy itself some time to figure out how to proceed when a United States District Judge agreed to postpone an antitrust case brought by the Department of Justice. 

AT&T had until Jan. 12 to file a report explaining whether it planned to proceed with the deal or not.

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