By Harro Ten Wolde and Georgina Prodhan
FRANKFURT/LONDON (Reuters) - AT&T said it would take a $4 billion charge in case its takeover of T-Mobile USA fails, reflecting the dwindling chances for the deal seen as job-destroying by powerful political opponents.
The U.S. telecoms group and T-Mobile owner Deutsche Telekom, said they would continue to pursue anti-trust approval for the $39 billion takeover from the U.S. Department of Justice but withdrew for now applications to the industry regulator.
"AT&T Inc and Deutsche Telekom AG are continuing to pursue the sale of Deutsche Telekom's U.S. wireless assets to AT&T," they said in a statement on Thursday, the Thanksgiving holiday in the United States.
Both the DOJ and telecoms watchdog the Federal Communications Commission oppose the deal, which would reduce the number of national mobile carriers to three while consumers are struggling to make ends meet and unemployment rises.
FCC approval would be meaningless if the DOJ blocked the deal, and AT&T and Deutsche Telekom said they would return to the FCC process if they secured approval from the DOJ.
Analysts said the merger, badly needed by sub-scale T-Mobile USA -- the smallest of the four U.S. national mobile operators -- looked less likely than ever to succeed.
Espirito Santo analysts said AT&T's decision to take the $4 billion charge this quarter showed the company's own assessment of the chances of success had fallen, causing its auditors to force the company to take the hit now.
"It tells us something about timing too -- suggesting that AT&T may decide to walk away at the first opportunity (March 20 2012) rather than waiting for the ultimate September 20 2012 deadline," they wrote in a note to clients.
Deutsche Telekom shares were up 0.2 percent to 8.76 euros by 1315 GMT (8:15 a.m. ET), broadly in line with the European telecoms index, which was up 0.5 percent.
Today's decision follows a blow earlier this week when the FCC said it would try to send the deal to an administrative law judge for review.
The FCC says the merger would result in a massive loss of U.S. jobs and investment, and significantly diminish competition, while the DOJ says it would lead to higher wireless prices for consumers and businesses.
The DOJ has gone to court to block the deal, and a trial in that case is due to begin on February 13. Any administrative hearing at the FCC, which is charged with evaluating the public-interest merits of the deal, would begin after the anti-trust trial.
U.S. consumer spending growth slowed last month and business capital investment plans were weak, although first-time claims for jobless benefits remained in a range that hinted at improving labor-market conditions.
AT&T has 260,000 employees, most in the United States. Deutsche Telekom employs 36,000 at its U.S. unit.
AT&T argues that the T-Mobile merger could actually create tens of thousands of jobs during integration and network upgrades, and has pledged to bring back 5,000 jobs that it has moved overseas -- but many observers are skeptical.
"I don't believe there's any politician in America who's interested in being associated with something that has a negative impact on the job situation in America," Denmark-based telecoms consultant John Strand of Strand Consult told Reuters.
NO PLAN B
Acquiring T-Mobile would have vaulted number two-ranked AT&T into the leading position in the U.S. wireless market, overtaking Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc.
It would also have solved a years-long problem for Deutsche Telekom, whose U.S. unit has long ceased to be a source of growth and is in urgent need of investment.
Credit rating agency Moody's said it believed Deutsche Telekom would rather exit the U.S. market than go it alone.
"The options open to Deutsche Telekom if it were to stay in the US market are much less palatable than if it were to exit," wrote Carlos Winzer, senior vice president at Moody's.
However, the rating agency believes that Deutsche Telekom will fight aggressively alongside AT&T to salvage the sale process in order to improve its weak position in the US.
A failure would throw Deutsche Telekom Chief Executive Rene Obermann's strategy into disarray and may force him to throw money at a business he thought he was rid of. Company officials have said there is no "Plan B."
The company faces a long delay at best and may be driven back into the arms of number three U.S. carrier Sprint Nextel -- a less suitable partner for whom T-Mobile USA would not be worth nearly as much now as it was to AT&T in March.
A break-up fee of up to $6 billion, including some spectrum and roaming access, would provide some consolation and could allow Deutsche Telekom to sell the U.S. unit at a discount, Strand said.
Telecoms consultant Fred Huet of Greenwich Consulting said T-Mobile USA would immediately need to find ways of cutting costs. "They need to find some way of sharing cost across operators," he told Reuters.
"They need to have a better cost base, otherwise they're going to be in real trouble soon."
(Additional reporting by Chris Steitz and Maria Sheahan in Frankfurt and Georgina Prodhan in London; Editing by Chris Wickham)
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