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AT&T,T-Mobile USA break-up is $6 billion: sources
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AT&T,T-Mobile USA break-up is $6 billion: sources
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By Nadia Damouni and Paritosh Bansal
NEW YORK (Reuters) - AT&T Inc (T.N) has promised to give Deutsche Telekom (DTEGn.DE) $6 billion in assets, services and cash as a break-up fee if U.S. regulators reject its proposed $39 billion purchase of...
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Reflections are seen in the window of an AT&T store in New York March 21, 2011.
Credit: Reuters/Brendan McDermid
By Nadia Damouni and Paritosh Bansal
NEW YORK |
Thu May 12, 2011 2:35pm EDT
NEW YORK (Reuters) - AT&T Inc (T.N) has promised to give Deutsche Telekom (DTEGn.DE) $6 billion in assets, services and cash as a break-up fee if U.S. regulators reject its proposed $39 billion purchase of the German company's T-Mobile USA, according to sources familiar with the matter.
The $6 billion would include $3 billion of cash, as AT&T has previously disclosed, and about $2 billion worth of spectrum and a roaming agreement valued at $1 billion, according two sources who asked not to be named as those details were not public.
AT&T declined comment for the story.
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 high fee underscores AT&T's confidence that it can convince regulators to approve the deal, which is already being heavily criticized by many consumers and AT&T rivals including No. 3 U.S. mobile service Sprint Nextel (S.N).
The acquisition of T-Mobile USA, ranked No. 4, would enable 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 (VZ.N) and Vodafone Group Plc (VOD.L).
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, had to defend the deal at a hearing held by skeptical lawmakers in 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 once 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 were up 37 cents, or 1 percent, at $31.75 in afternoon trade on the New York Stock Exchange.
(Additional reporting by Sinead Carew; Editing by Steve Orlofsky)
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Comments (1)
Vertigo wrote:
Fortunately for me the timing is good. After several consecutive contract renewals with T-mobile my contract recently expired. I am switching to Sprint.
The AT&T / T-mobile merger should never be approved as it is substantially anti-competitive and anti-consumer. AT&T’s arrogance / confidence is simply an indicator of the lock they and their lobotomists have on Congress.
May 12, 2011 2:28pm EDT -- Report as abuse
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