T-Mobile May Get Nothing If AT&T Merger Fails

AT&T may not have to pay a $6 million termination fee to Deutsche Telekom if its proposed merger with T-Mobile falls through, which may leave T-Mobile financially vulnerable.

The Dallas, Texas-based carrier may not have to pay Deutsche Telekom, T-Mobile's parent company, if U.S. regulators don't approve the $39 billion acquisition within a certain time frame. In addition, AT&T may avoid the break-up fee if T-Mobile's value falls below a certain point.

The U.S. Department of Justice recently filed suit to halt the merger, casting serious doubt on the deal's viability going forward, which, besides seriously affecting AT&T's ability to manage heavy traffic on its network, will put T-Mobile in a vulnerable position.

T-Mobile has lost some of its value over the past few months, as contract customers, who don't want to be part of AT&T in the case of a merger, have left the company in droves. The carrier will lose even more value if regulators demand parts of the company be sold as one of the conditions for deal approval, making it even more likely Deutsche Telekom may be denied the break fee.

AT&T's payment to T-Mobile in the case of a scuttled deal is supposed to include $3 billion in cash, and another $3 billion in spectrum and reduced charges for T-Mobile customers who make calls to AT&T subscribers.

The lack of this compensation will likely leave T-Mobile in a tough spot moving forward. A failed merger may leave the carrier without the millions of customers it lost in its wake and without the resources needed to continue to build a competitive 4G network.

The carrier is already in fourth place in the U.S. wireless market, and may not survive a failed merger without the payout.

T-Mobile could be forced to fold, or may be left too weak to compete the way it once did if the merger fails. If that happens, AT&T's proposal itself may do damage to the U.S. wireless market, because even if it isn't approved, it may create a scenario in which no one wins.

The number-one concern of the Federal Communication's Commission, and now the Department of Justice, is that a merger could eliminate a major wireless competitor and leave U.S. customers with fewer options. Now, it seems the fears of the FCC and DoJ may come to fruition whether the merger happens or not.

T-Mobile May Get Nothing If AT&T Merger Fails originally appeared at Mobiledia on Tue Sep 06, 2011 12:17 pm.

Source: http://www.mobiledia.com/news/106555.html

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