What’s next for AT&T and T-Mobile merger?

What’s next for AT&T and T-Mobile? Not a merger in the near future.

The wireless giants say they are fighting to salvage their $39 billion deal. But some analysts say the firms look unlikely to win their mounting regulatory battles against the Justice Department and now the Federal Communications Commission. By withdrawing their merger application at the FCC, the companies hoped to focus on their legal defense against Justice’s suit to block the deal. As reported, last week the chairman of the FCC signaled he opposed the deal and would send the proposal to an administrative judge. “We believe the DOJ will likely win in court, and the FCC arguments provide it with further ammo,” said Christopher King, a principal at Stifel Nicolaus. “We also believe the initial FCC resistance provides DOJ with added leverage to keep fighting if it loses the first round of litigation, or to negotiate a settlement, if necessary.” AT&T has said it will reapply for the merger at the FCC. And Bloomberg reported last week that AT&T is preparing a settlement offer to divest 40 percent of T-Mobile’s assets. But don’t expect a wireless mega-merger next year or in the foreseeable future, analysts say.

Expect cable and satellite Internet service providers to eye T-Mobile as a way to enter the lucrative wireless business their customers seek. “In the short term, we expect T-Mobile to be a disruptive pre-paid operator. Longer term, we speculated that a deal with the cable operators is T-Mobile’s best available option,” said Craig Moffett, an investment analyst for Sanford C. Bernstein.