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Proposed AT&T Acquisition Of T-Mobile USA Is Win-Win For DT, Not So Much For ATT If Deal Fails

ATT wants to acquire T-mobile USA, a subsidiary of DT, Germany for approximately US$ 39 billion. The deal was announced on March 20, 2011 and is currently being reviewed by the regulators. The terms of the deal, however, seem to favor T-Mobile more than ATT. If the deal is approved by the government authorities then the merged entity will become the largest wireless operator by subscribers in the US, surpassing the current market leader in Verizon. Consequently, T-Mobile subscribers get LTE and Apple’s iPhone. On the flip side, if the deal is not approved, ATT will pay T-Mobile US$ 6 billion in cash and asset as merger break-up fee, a world record. 

But GSM subscribers will be the biggest losers, should the deal go through as the acquisition will make ATT as the only GSM operator in the country. Competitiveness in the market is at stake!

Read below for the complete text…

AT&T has promised to give Deutsche Telekom a break-up fee worth $6 billion if U.S. regulators reject its proposed takeover of T-Mobile USA, sources familiar with the matter said.

The $6 billion package is double the value that was publicly disclosed and a record for a merger break-up fee.

The agreement includes about $2 billion worth of spectrum and a roaming agreement valued at roughly $1 billion, according to two sources who asked not to be named as those details were not public.

AT&T declined comment on Thursday.

AT&T disclosed its $3 billion cash break-up fee in March, when it struck its $39 billion deal to buy Deutsche Telekom’s T-Mobile USA unit, but it has declined to put a value on the spectrum it would give up or the roaming pact.

While the cash agreement is already unusually high at 7.7 percent of the total deal price, the addition of assets and services of a similar value would mean that the companies are breaking global records with a 15.4 percent break-up fee, according to Thomson Reuters data.

The deal has been heavily criticized by many consumers and AT&T rivals including No. 3 U.S. mobile service Sprint Nextel.

The acquisition of T-Mobile USA, ranked No. 4, would allow AT&T, currently the No. 2 U.S. mobile service, to leapfrog the leader of the U.S. market, Verizon Wireless, a venture of Verizon Communications and Vodafone Group.

The deal needs approval from the U.S. telecommunications regulator, the Federal Communications Commission, and the Department of Justice, which examines antitrust issues around mergers.

AT&T’s chief executive, Randall Stephenson, defended the deal at a hearing held by skeptical lawmakers on Capitol Hill on Wednesday.

Based on valuations in past spectrum sales, $2 billion would pay for roughly 10 megahertz of spectrum, according to Fabricio Martinez, a UK-based consultant from Aircom International.

This is the minimum necessarily to offer high-speed wireless services based on the emerging technology Long Term Evolution (LTE), according to analyst estimates.

Martinez estimated that 10 megahertz would double T-Mobile USA’s current available spectrum for high-speed services.

But he noted that “ideally a carrier would want 20 megahertz,” for LTE services to perform well.

T-Mobile USA would be able to increase its current data speeds by only one and a half times using 10 megahertz for LTE, according to Martinez, who said that if it had 20 megahertz it could increase data speeds by four times.

AT&T shares closed up 26 cents, or almost 1 percent, at $31.64 in afternoon trade on the New York Stock Exchange.

Source: Reuters

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Discussion

9 thoughts on “Proposed AT&T Acquisition Of T-Mobile USA Is Win-Win For DT, Not So Much For ATT If Deal Fails

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Trackbacks/Pingbacks

  1. Pingback: Proposed AT&T Acquisition Of T-Mobile USA Is Win-Win For DT, Not … | Telecom Operator News - May 15, 2011

  2. Pingback: Proposed AT&T Acquisition Of T-Mobile USA Is Win-Win For DT, Not … | Telecom Carriers - May 15, 2011

  3. Pingback: Proposed AT&T Acquisition Of T-Mobile USA Is Win-Win For DT, Not … | Telecom Regulation - May 15, 2011

  4. Pingback: Proposed AT&T Acquisition Of T-Mobile USA Is Win-Win For DT, Not … | Telecom Operator News - May 15, 2011

  5. Pingback: Proposed AT&T Acquisition Of T-Mobile USA Is Win-Win For DT, Not … | Telecom Regulation - May 15, 2011

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