AT&T/T-Mo merger seems increasingly fungible

Rob Powell/Telecom Ramblings
Where there was once one giant deal that was absolutely critical to the survival of the wireless industry, there now seem to be many. Days after the DOJ sued to stop the merger, news of the backup plans AT&T built into the thing in the first place is now creeping out. It’s also becoming clear just how little we really know about the underlying details.
 
Yesterday a Reuters report cited three people close to the deal, saying that if regulators demand asset sales above 20% of the $39 billion deal, then they get to reduce the price.
 
And if regulators demand asset sales of more than 40% of the deal, then they can get out with a breakup fee. But just who would be buying $15 billion+ of 3G wireless assets right now is unclear – Verizon Wireless doesn’t need it, Sprint may not be in a position to spend that much as it gets its 4G ducks in a row, and nobody else really has resources of that magnitude.
 
And about that breakup fee. A combination of cash, spectrum, and roaming agreements variously reported at from $3 billion to $6 billion, it seems amazingly high – high enough that some have speculated that T-Mobile could use it to reinvigorate their US business. But it has also been reported that AT&T might not actually have to pay it under some conditions. I’ll bet Deutsche Telekom wouldn’t be terribly pleased if such a clause were triggered.
 
It’s looking like a complicated dance, in which AT&T will eventually get *something*. But trying to predict exactly what that will be is getting complicated. Surely it’s going to be less than originally planned though. Sprint has had an enjoyable week.

Rob Powell is founder & editor of Telecom Ramblings, which was set up in 2008. The website is dedicated to discussing trends and developments in the telecom industry.

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