When AT&T withdrew it's merger application from the FCC, they hoped to simplify their task by temporarily eliminating one battle front so they could focus on the other. They moved very quickly over the long Thanksgiving weekend while the bureaucrats were out of the off so as to stop the FCC from actually taking the action they had been about to put for a vote. But in that haste for a tactical triumph, they may have forgotten to think about the strategic implementations of pulling their FCC papers.
On Friday lawyers for the Justice Department said they would seek to stay or dismiss their own lawsuit to stop the deal, since the fact that telecom regulators weren't even being consulted means the deal is effectively dead already. In the words of Joseph Wayland, "It's not a real transaction until they file with the FCC." AT&T of course isn't particularly happy with this possibility, since if the DOJ's motion succeeds they don't really have much left to work with. So far the judge seems sympathetic to the DOJ, and may be irritated about the whole thing to just want it gone. Despite the public face AT&T is putting out, it is starting to look like things might unravel rather quickly.
The government does have a point here of course, given the fact that AT&T is now said to be talking with everyone who will listen about a divestment package. Why waste everyone's time and legal fees arguing a case in court for a merger which nobody thinks is going anywhere without very major changes. Well, except for those contractually obligated to say otherwise of course.
Interestingly though, the media would probably side with AT&T for once if it could, as a trial would give them plenty of new grist for the mill. If the whole thing retreats into the back room there won't be much of substance to talk about until the whole thing goes away or AT&T emerges with a newly reconstructed deal to push through. On the other hand, if the deal falls apart then the speculation will just move on to what could be a rather more fascinating free-for-all over T-MobileUSA's alternatives.
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