@jbtaylor on tech

In what has to have been one of their worst PR moves of the last 8 months, AT&T and Deutsche Telekom announced at 2:30 a.m. ET on Thanksgiving morning that they, in the companies' words, on Nov. 23, "withdrew, without prejudice" their pending application to transfer T-Mobile USA's spectrum licenses to AT&T.

The move meant reporters in the U.S. who have been covering the story woke up to the fact that their competitors in Europe had the scoop. It also meant that they spend all of Thanksgiving Day dealing with AT&T's turkey of announcement, rather than spend it with their families.

And let me tell you, reporters are fuming.

AT&T and Deutsche Telekom took this step after the Chairman of the FCC indicated to media a few days earlier that he had circulated a draft order designating the proposed transaction for hearing before an Administrative Law Judge.

(This is a necessary step the FCC must take before it can officially block the merger from taking place.)

It's not entirely clear that AT&T's and Deutsche Telekom's actions will prevent the FCC from acting. In media briefings on Friday, FCC officials indicated they had three choices in responding:

• They can approve the request to withdraw the application "without prejudice", which means the companies can file a new application at any time.

• They can deny the request "with prejudice", which means they can't resubmit the same or similar application ever again. This would immediately kill the transaction, but would deny the public the benefit of seeing the full results of the FCC's investigation, which would have been disclosed in the hearing designation order.

• They can deny the request and move ahead with plans to to kick the whole matter to the Administrative Law Judge. If the FCC does this, the public, including the Boards of Directors of AT&T and Deutsche Telekom, will see what many observers expect will be a devastating analysis of the proposed transaction.

At least that's what the FCC says it can do.

On Friday, AT&T vehemently disputed that, saying to media that the FCC's statements to media were inaccurate. Wayne Watts, AT&T's top lawyer told media, "We have every right to withdraw our merger from the FCC, and the FCC has no right to stop us. Any suggestion the agency might do otherwise would be an abuse of procedure which we would immediately challenge in court."

Not content to ruin reporters' Thanksgiving Day and their Friday as well, on Saturday, AT&T indicated to financial media unfamiliar with the Department of Justice's antitrust guidelines that the company is prepared to divest up to 40 percent of T-Mobile's assets in order to secure Justice Department approval.

I can tell you right now that kind of offer can't be accepted under the antitrust guidelines. And it's clear that the Justice Department is in no mood to settle, especially since they just won a huge antitrust case which is very similar to the one they filed against AT&T, Deutsche Telekom and T-Mobile.

So what's likely to happen next?

Well, I think a lot will become clearer on Nov. 30.

On that day, three things are happening:

• The FCC is holding its monthly meeting. While AT&T's proposed takeover of T-Mobile isn't on the agenda, I'm expecting the FCC Chairman to speak with media immediately following the meeting to answer their questions. The Chairman is cautious when it comes to something that will likely be litigated, so it wouldn't surprise me if the agency made its next move before that meeting. If it doesn't do so, look for the Chairman to make some news in his remarks to media that day.

• The Senate Commerce Committee is holding nomination hearings for Ajit Pai and Jessica Rosenworcel to become FCC Commissioners. While the nominees won't comment on any matter pending before the Commission, you can count on Senators using their question time to make speeches on all the issues before the FCC. If they don't address this dispute between the FCC and AT&T in questions, media will hunt them down after the hearing adjourns.

• And most importantly, Judge Ellen Segal Huvelle will hold a status hearing in the Justice Department's case against AT&T, Deutsche Telekom and T-Mobile. The judge has been moving quickly toward a February trial, but now some observers wonder why she would stick to her expedited schedule, given that under AT&T's interpretation of FCC rules, the entire comment cycle which took almost 5 months to complete the first time would take at least that long under a resubmitted application. Judge Huvelle also has to consider the opinion of the FCC in making her decision. Now that she knows that the agency was on the way to blocking the transaction, and AT&T is disputing the FCC's interpretation of its own regulations, and is threatening court action, she may very well put the brakes on the expedited schedule she approved in September. On Nov. 30, she will likely have something to say about the recent actions by the FCC, AT&T, Deutsche Telekom and T-Mobile.

In the mean time, I took a closer look at the letter AT&T and Deutsche Telekom sent the FCC. It only had one sentence and it's a doozy.

"AT&T Inc. and Deutsche Telekom AG hereby withdraw, effective immediately, all of the pending applications in this docket, as listed in the Public Notice released by the Commission on April 28, 2011, and, in accordance with the Rules, the applications are to be dismissed without prejudice."

The words, "are to be dismissed without prejudice" are an admission that the companies understand that that they they are making a request of the FCC.

In other words, "are to be dismissed" by whom? The FCC of course! Those words aren't in the letter by accident.

We will see how this plays out.

In the mean time, since AT&T loves to give reporters Holiday themed cupcakes this time of year, I thought these Grinch cupcakes pictured above would be a good suggestion. ;-)

What do you think?

p.s. I'd like to remind you, once again, this is my personal blog and doesn't necessarily reflect the views of my employer.