AT&T (NYS: T) attorneys were sure putting in the overtime last week. It wasn't until the wee hours of Thursday morning (Thanksgiving, to the rest of us) that the company withdrew its application to the Federal Communications Commission for approval of its merger with Deutsche Telekom's T-Mobile USA unit.

That hasty withdrawal was in response to the proposal late Tuesday by FCC Chairman Julius Genachowski that the commission should move the case in front of an administrative law judge. AT&T saw this as a likely disapproval of the deal and wanted to withdraw its application before the FCC commissioners had a chance to vote on the chairman's proposal.

Now, here's where it gets sticky. The FCC has suggested that it might allow AT&T to withdraw its application, but with prejudice. That means it might not allow the company to refile. This elicited a strong response in a statement Friday from AT&T's top lawyer, Wayne Watts:

We have every right to withdraw our merger from the F.C.C., and the F.C.C. 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.

Court sense
But AT&T already has a court date. This one in February to defend its proposed $39 billion acquisition against the Department of Justice's antitrust lawsuit. A combined AT&T and T-Mobile would create a carrier with a 43% share of the wireless marketplace, leaving current leader Verizon (NYS: VZ) in second place with 31%, and Sprint Nextel (NYS: S) in third with 16%.

AT&T's turkey day retreat from a potential FCC chopping block might be seen as an act of desperation in order to buy more time to work something out before they head to court. Bloomberg reported Friday that the company might try to come to a settlement with the DOJ by jettisoning up to 40% of T-Mobile's assets. Those could include customers, equipment, and the always valuable wireless spectrum.

At least one of the second-tier carriers would welcome the opportunity of getting some of those resources. As my Foolish colleague Anders Bylund has reported, MetroPCS (NYS: PCS) could be a customer at a possible AT&T yard sale. But that company, which is only one-third the size of T-Mobile, may not have the wherewithal to buy enough to make a difference.

The stakes are high, the prospects lowering
In the meantime, AT&T has not sounded optimistic about the odds of it pulling off its deal. Part of the bargain it reached with Deutsche Telekom back in March, was that if the merger didn't go through, AT&T would forfeit a significant sum of money and resources to the seller. On Thursday, the company announced it was planning to take a $4 billion charge for this quarter, one that would go toward that breakup fee.

Any merger like this has to get past both the Department of Justice and the Federal Communications Commission. AT&T must be hoping that if it can somehow get past the DOJ's antitrust lawsuit, the deal won't smell so bad to the FCC.

AT&T has long been a solid dividend payer for many of us, myself included. For a list of other secure dividend-paying stocks, get this free special report from the Fool: Secure Your Future With 11 Rock-Solid Dividend Stocks.

At the time this article was published Fool contributor Dan Radovsky owns shares of AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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