The move, which AT&T has vowed to fight, could cost the telecoms provider a staggering $6bn in break-up fees, including $3bn in cash, mobile spectrum and a roaming agreement.
The Justice Department filed a lawsuit yesterday claiming that eliminating T-Mobile as a competitor would be disastrous for consumers and would raise prices, particularly because the smaller provider offers cheaper deals.
If successful, the lawsuit would scupper the biggest deal of the year and trigger an even bigger collapse than Prudential’s failed $35.5bn for Asian insurance giant AIA last year.
It would also result in around $150m in lost advisory fees for the seven investment banks working on the deal – JP Morgan Chase, Greenhill and Evercore for AT&T and Morgan Stanley, Deutsche Bank, Credit Suisse and Citi for T-Mobile.
The breakdown of the deal will provide a boost up the advisory rankings for Bank of America, which missed out on the lucrative contract.
Sprint Nextel, the smallest of the top three US carriers, is now being viewed as a potential vulture, stepping in to bid for T-Mobile.
AT&T shares slumped 3.85 per cent on the news, while Sprint rose 5.9 per cent. T-Mobile USA owner Deutsche Telekom tumbled 7.6 per cent.