Sunday, November 27, 2011

AT&T to attempt to save T-Mo deal, with 'an offer' it hopes the DoJ can't refuse

AT&T hasn't given up on acquiring T-Mobile USA, although its accountants, which have decided to take a $4B charge to Q4 2011's results, seem to be pointing toward a deal failure. However, sources now say that AT&T is trying to save the deal with an "offer" to the Justice Department.
The source familiar with the matter said that AT&T is considering an offer to divest itself of as much as 40 percent of T-Mobile USA's assets, as part of the acquisition. The divestiture would be far larger than AT&T had initially expected, but the exact size of the "offered" disposals hasn’t tet been determined, the source added.

It's unclear that even if AT&T agreed to divest itself of more assets, the DoJ and the FCC would go along with the deal, as it would still reduce the number of "big" carrier from 4 to 3, and give AT&T and Verizon, combined, a huge share of the U.S. cellular market.

AT&T and T-Mobile USA's parent company Deutsche Telekom first announced plans for AT&T, the nation's No. 2 wireless carrier, to acquire No. 4 wireless carrier T-Mobile USA for $39 billion back in March 2011. AT&T is mostly interested in T-Mobile USA's wireless infrastructure, which it has said could help it complete its rollout of LTE faster than it could otherwise do.

The merger has faced plenty of scrutiny. Earlier, the Justice Department filed a lawsuit to block the deal, which was later joined by the attorneys general of seven U.S. states.

Sprint, the nation's third largest wireless carrier also filed its own lawsuit.

Finally, after the FCC announced that it wanted to refer the case to an administrative law judge, which would be the first step toward a move to block the deal, AT&T and DT said they were withdrawing their application for the sale from the FCC.

AT&T also said it would book the $4B in "penalties" it would be required to pay Deutsche Telekom if the deal failed in the Q4 2011 quarter, virtually saying it felt the deal was dead.

Many analysts chimed in after the two companies said they were withdrawing their FCC application, with one, Craig Moffett, an analyst at Sanford C. Bernstein saying, "The fat lady hasn’t started singing yet but she’s holding the mike and the band is about to play."

Bare Necessities

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