AT&T announced on Thursday that it withdrew its application with the Federal Communications Commission (FCC) to buy T-Mobile, but the company said it had not given up on completing the $39 billion deal.

The move is in response to FCC Chairman Julius Genachowski’s announcement on Tuesday that he would seek an administrative hearing to review the deal, saying he was not convinced it would benefit the public.

In a statement, AT&T said it was withdrawing its application to focus on fighting the Justice Department’s lawsuit, which alleges the merger would violate antitrust law by stifling competition in the wireless market. That case is scheduled to go to trial in February.

An FCC hearing would be before an administrative law judge, would resemble a trial and could take months to complete. The full commission would then vote on whether to block the deal.

By withdrawing its application, AT&T triggers a $4 billion breakup fee that it had agreed to pay to T-Mobile’s parent company, Deutsche Telekom. The fee is $3 billion in cash and $1 billion in spectrum assets.

“AT&T Inc. and Deutsche Telekom AG are continuing to pursue the sale of Deutsche Telekom’s U.S. wireless assets to AT&T and are taking this step to facilitate the consideration of all options at the FCC and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice either through the litigation pending before the United States District Court for the District of Columbia… or alternate means,” AT&T announced in a statement. “As soon as practical, AT&T Inc. and Deutsche Telekom AG intend to seek the necessary FCC approval.”

But consumer advocacy groups who oppose the deal said the move shows AT&T has all but given up on buying T-Mobile.

Gigi Sohn, president of advocacy group Public Knowledge, said AT&T’s chances of completing the deal are “almost gone.”

Andrew Schwartzman, policy director of law firm Media Access Project, called the move an “act of desperation.”

(Source: The Hill)