AT&T Throws in The Towel on T-Mobile Bid

AT&T is officially withdrawing its plan to acquire carrier T-Mobile. Early Monday evening, The Wall Street Journal confirmed that AT&T is giving up its initial plan as result of insurmountable opposition from federal regulators.

As a result, AT&T will pay $3 billion in cash and turn over some of its wireless spectrum to T-Mobile owner Deutsche Telekom AG. This is AT&T’s penalty for falling short of completing the deal.

Beyond the hefty payday now in order for T-Mobile, Deutsche Telekom is also getting a “mutually beneficial” roaming agreement with its formerly interested potential buyer.

According to coverage from Reuters:

Deutsche Telekom said it will return to reporting T-Mobile USA as part of its continuing operations and that its group forecast for 2011 of an expected earnings before interest, tax, depreciation and amortization (EBITDA) of around 19.1 billion euros ($24.86 billion) would remained unchanged.

The merger was effectively stymied by the US Federal Communications Commission and the U.S. Department of Justice, as both bodies stated that the merger would result in a limitation of competition and substantial job layoffs.

Are you surprised by AT&T admitting defeat and backtracking on the proposed merger? Or was the writing clearly already on the wall?