AT and T Inc (NYSE: T) is keeping a provision of $4 billion this quarter to cover the risks of a collapse of its $39 billion bid to take over T-Mobile USA, as the transaction has been challenged by the U.S. Justice Department.
Deutsche Telekom, owner of T-Mobile, and AT and T have withdrawn an application to the U.S. Federal communications commission to pursue getting a clearance from the Justice Department. The pre-tax accounting costs are the potential fees due to Deutsche Telekom in case of a breakup.
In August, the transaction was blocked by the Justice Department on the grounds that a merger of AT and T and T-Mobile would hamper competition as it would eliminate one of four national U.S. wireless carriers. The proposed takeover is likely to be sent for a hearing before an agency judge by commissioners on the instructions of FCC Chairman Julius Genachowsky.
Will Draper, an analyst at Espirito Santo in London who has a “neutral” rating on Deutsche Telekom shares said “What that tells you is AT and T’s auditors have now concluded that the deal is likely to fail and have forced the company to take that charge.” He said that the probability of the transaction going through now is about 10 percent, down from 25 percent.
In Frankfurt, Deutsche Telekom rose 11.8 cents, or 1.4 percent, to 8.86 euros and rose 0.7 percent as of 10:09 a.m. whereas in U.S. trading Wednesday, AT and T dropped 1.9 percent to $27.55.
Read more: AT and T to Keep Provision of $4 Billion Costs This Quarter on T-Mobile Risks