T-Mobile may miss out on AT&T break-up fee, report says
AT&T may not have to pay T-Mobile USA's parent, Deutsche Telekom, the $6 billion break-up fee even if the mega-merger between wireless carriers falls apart, according to Reuters.
AT&T may not be on the hook for the fee under certain conditions, a source told Reuters in a story that ran today.
Spokesmen for AT&T, T-Mobile, and Deutsche Telekom didn't immediately respond to CNET's requests for a comment.
AT&T and T-Mobile were thrown for a loop last week when the Department of Justice sued to block AT&T's planned acquisition of T-Mobile, citing concerns over the loss of competition in the industry. AT&T has been scrambling to keep the deal alive and is expected to offer up more compromises to get the deal done.
Many in the industry expected AT&T to complete the acquisition, swayed by the unusually large break-up fees. Those fees are typical of M&A deals, ensuring some protection to the seller if the transaction falls through. But the large size, which includes $3 billion in cash and the balance in services, assets, and a roaming agreement, suggested AT&T was confident in its ability to close the deal.
The break-up fee would only be paid if certain conditions were met, Reuters said. The deal has to receive regulatory within a certain time, or the contract is deemed void. The value of T-Mobile also can't fall under a certain level, which could happen if the government requires that parts of the business have to be sold to get the deal approved.
Without the break-up fee, Deutsche Telekom is left with a weakened T-Mobile that has been hurt by the publicity over the pending deal. Despite offering price cuts and promotions, T-Mobile continues to lose its most valuable contract customers at an alarming rate. In addition, it lacks the spectrum to build its own true 4G wireless network.
The deal has proven to be a contentious issue. AT&T has argued that the deal is necessary to increase its spectrum position and allow for a wider deployment of 4G services, and has boasted supported from several states, its unions and technology companies. But opponents such as Sprint Nextel, consumer advocate groups and other wireless companies have argued that the deal would hurt competition and innovation in the industry.