AT&T and T-Mobile 'Duopoly' Blocked, $39 Billion Deal Crumbles

Major cell phone carrier AT&T has dropped its $39 billion bid for rival carrier T-Mobile.

Just four months ago, the government raised concerns over the deal resulting in higher prices and fewer choices for consumers, as well as possible reductions in innovation. On Aug. 31, the Justice Department sued to stymie the deal, and the Federal Communications Commission's chairman spoke out against it last month.

The companies withdrew their FCC application soon after.

AT&T, which is the second biggest carrier, would have been the largest, controlling up to 80 percent of the cell phone carrier market had the deal been made. Sprint, the number three service carrier, said the deal would undeniably result in a “duopoly.”

Others, including Deputy U.S. Attorney General James Cole, lauded the decision saying, "This result is a victory for the millions of Americans who use mobile wireless telecommunications services," according to The Associated Press.

"This result is a victory for the millions of Americans who use mobile wireless telecommunications services," he continued. "A significant competitor remains in the marketplace and consumers will benefit from a quick resolution."

AT&T will now have to pay Deutsche Telekom $3 billion as a breakup fee and give it about $1 billion worth of airwaves the company doesn't require for its high-speed 4G network. Also, the AT&T will enter into a roaming agreement with Deutsche Telekom so AT&T and T-Mobile customers can use the same networks.

AT&T said the government's litigations do not change the challenges faced by the wireless phone industry, such as the need for more airwaves to support faster downloads on higher speed networks.

AP reports that AT&T already has a vast supply of unused wireless spectrum which it will use to expand its network, but much of T-Mobile's spectrum is already in use, so the deal would not have allowed for more AT&T airwaves. The decision may actually result in bigger problems for T-Mobile, as Deutsche Telekom has aggressively been trying to sell the cell carrier.

AT&T, Sprint, and Verizon (the number one cell phone carrier) have already or will soon transfer to networks that use long-term evolution. T- Mobile has missed out on smartphone deals such as the iPhone, but competitors believe T- Mobile shouldn’t be counted out, and can increase revenue in years to come.