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AT&T and Deutsche Telekom may not be seeing eye-to-eye on T-Mobile deal

Posted: , by Alan F.

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AT&T and Deutsche Telekom may not be seeing eye-to-eye on T-Mobile deal
In front of the media and U.S. regulators, AT&T and Deutsche Telekom act like that couple from high school that were always holding hands in front of everyone, but in private were always fighting. According to Bloomberg, the pair act all lovey-dovey when the talk is about getting the AT&T purchase of T-Mobile closed. But when it comes to strategy when times get tough and regulators are stepping in front of the deal trying to block it, then both companies have divergent paths to take to protect their self-interest.

The problem is that with the DOJ seeking to put the deal on ice for good, it is in AT&T's best interest to keep the entire process going as long as possible, according to fund manager Leon Cappaert of KBC Asset Management in Brussels. On the other hand, Deutsche Telekom would rather take all of its marbles and go home now, if it appears that the deal is dead. Any extended time that T-Mobile's future looks undecided is time that other carriers could use to continue poaching customers away from the nation's fourth largest carrier.
 
The board at Deutsche Telekom still has the back of CEO Rene Obermann, but some members are getting itchy to go back to other potential suitors and try to re-open talks with some of them. The problem is that with a contract still in effect, the board is frozen and cannot legally approach other companies. Deutsche Telekom Chief Financial Officer Timotheus Hoettges said that the company spoke with 5 potential suitors interested in T-Mobile before the AT&T bid was announced.

The deal will either close or the contract will be voided by regulatory issues. If the latter occurs, T-Mobile could be put back up for sale or possibly be taken public. It is estimated that in a public offering, the U.S. carrier would be valued at $28 billion vs. the $39 billion that AT&T is willing to pay for the mobile operator. And there is also the matter of the $6 billion in cash and assets that AT&T must pay to Deutsche Telekom as a break-up fee. Under certain circumstances, AT&T might not be required to pay the fee. For example, if  U.S. regulators have not agreed to the deal by a specific date, or if the value of T-Mobile declines under a certain figure, AT&T is not liable to make the payment as we reported. The longer that T-Mobile remains in limbo, the higher the chance that the regulators fail to approve the deal by the date that would require AT&T to make the payment. Also, as T-Mobile remains in limbo, the odds favor the carrier losing value, perhaps enough as to cancel the break-up fee. This is another reason why AT&T wants to stretch the matter out while Deutsche Telekom favors a quick resolution. Of course, if it must pay the $6 billion in cash and assets, it helps AT&T's financial position to put off paying the break-up fee until the last possible moment.

While AT&T has asked for an expedited hearing and the judge handling the case is said to work quickly, it could still be months before the final words have been spoken on the legal front. If AT&T is blocked from buying T-Mobile, by waiting just as long as possible to give up the deal, AT&T improves its standing in the U.S. mobile carrier landscape by weakening T-Mobile. Sprint and Verizon would benefit as well which might make a cynic wonder if Sprint's constant calls for the deal to be blocked is just a way to stretch out the process and leave a bloodied and battered T-Mobile too weak to try to catch up to the carrier directly above it.

As we informed you, the judge overseeing the case has ordered all parties involved to sit down and try to work out a settlement on September 21st.

source: Bloomberg via TmoNews

16 Comments
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posted on 10 Sep 2011, 08:51

1. Packer29 (Posts: 56; Member since: 10 Sep 2011)


Of course both companies are going to look out for number one so no real suprise there it makes since and why wouldnt they!

posted on 10 Sep 2011, 08:54

2. Galen20K (Posts: 516; Member since: 26 Dec 2008)


this is all getting so complicated... = /

posted on 10 Sep 2011, 09:31 5

3. leocal79 (unregistered)


Lets be real here no one wants this deal to go through especially not the customers

posted on 10 Sep 2011, 10:54 1

5. Rawrzellers (Posts: 224; Member since: 22 Aug 2010)


I agree, with T-Mobile putting out all these ads for newer cheaper plans lately it seems like they want to sell these plans so that if AT&T takes over their stuck having to serve those plans. I'm starting to wonder if T-Mobile ever wanted this deal to go through or they just wanted the publicity.

posted on 10 Sep 2011, 14:41 1

9. JeffdaBeat (unregistered)


The only folks who want this deal to go through is AT&T. I'm actually quite surprised and extremely happy the DOJ and some of Washington is opposed to this because you know AT&T is feeding them money.

But I feel like this will end badly for T-Mobile. I wouldn't put much stock into a company that might or might not be for sell. And if I were a T-Mobile customer, I'm not even sure if I would want to hang around for the merger itself. There are probably people who have ported their numbers out because the deal MIGHT happen. Imagine if it doesn't and T-Mobile loss revenue because of it...should be interesting to see how this turns out...

posted on 10 Sep 2011, 16:06 2

11. remixfa (Posts: 13935; Member since: 19 Dec 2008)


jeff,
the upside for Tmo customers is that they get to keep tmo pricing (as long as they are under contract) and end up on a bigger voice network. Once you explain that to most customers they calm down, though i do get quite a few freak outs weekly about the merger.
If the merger happens, I feel sorry for ATT customer service who will be doing nothing but fielding calls about why "loyal" ATT customers are now paying 60% more for their products than people that came in through the Tmo merger... and getting better service for it
Bigger voice network + tmo's much faster and larger 4g network + tmo's uber cheap contract value plans = huge win for remaining tmo customers and big loss for att customers who wont be offered the same deal.


Thats the ONLY positive i see in this whole merger mess. UGH... lol

posted on 10 Sep 2011, 23:43 2

13. JeffdaBeat (unregistered)


I never thought about the backlash from AT&T customers. That is going to hurt a lot.

I don't think AT&T will let T-Mobile customers keep their plans too long though. They will give them a few years, but ultimately say, well if you want to upgrade your phone, you need to switch to a new plan. I've seen that happen a few times with smaller buyouts and mergers. But you are correct, this will only benefit T-Mobile customers for the much needed network.

A while ago someone said that the government should lease spectrum instead of auctioning it out and honestly, I think that's a better way to go. The government always gets revenue as companies renew their leases and each company has a level playing field instead of a way a company flexes their muscles...

posted on 11 Sep 2011, 11:11

15. remixfa (Posts: 13935; Member since: 19 Dec 2008)


My guess is that the moment they want to upgrade their phone after the merger, they will be forced on to a new plan. Thats why I keep tellin my customers to make sure they have their ducks in a row and get everything they want before the merger happens. That way they get to keep that plan a little bit longer.

If ATT wants that spectrum for 4G LTE, they are gonig to have to offer Tmo customers the world to get them off of those plans and phones. Why in the world as a "customer" would I want to give up my $60 everything unlimited 4g plan and my phone that is capable of much higher data speeds than an ATT phone, just to help out ATT's spectrum wants.

I really dont know how they are going to accomplish that without losing a lot of customers.

posted on 10 Sep 2011, 10:52

4. Rawrzellers (Posts: 224; Member since: 22 Aug 2010)


I think NTTDocomo should buy T-Mobile and make it into the American Market that way. That would be a dream come true for me. Only if they brought over their phones and switched them to android instead of their default OS.

posted on 10 Sep 2011, 11:19

6. Costco4Life (unregistered)


At first i wanted this deal to go through, but the more i think of it i would rather have a company like comcast, who wants to get in the wireless market, buy tmobile. It is clear that DT dosnt want to keep tmobile anymore..

posted on 10 Sep 2011, 12:30 2

7. remixfa (Posts: 13935; Member since: 19 Dec 2008)


comcast is a devil just like ATT. Id rather see them split up to increase competition in the cable space instead of the monopoly/duopoly that exists there now.

Its fun to see how everyone is pulling on everyone else's strings trying to get whats best for them. I still think this thing is going to go through though.

posted on 10 Sep 2011, 14:03 1

8. Droid_X_Doug (Posts: 5866; Member since: 22 Dec 2010)


If U.S. DOJ and FCC are really looking foster competition in the mobile space, I don't see how the AT&T-Mobile deal goes through. There is no way that competition doesn't take a hit anytime you remove one of the competitors from a market. There is nothing that I have seen proposed by AT&T to make this deal happen that increases competition. AT&T is trying to say that the reduced competition is offset by increased access, which is a bullsh*t argument.

I agree that the game for AT&T has shifted to finding a way to avoid the break-up penalty.

posted on 10 Sep 2011, 14:44

10. remixfa (Posts: 13935; Member since: 19 Dec 2008)


i 100% agree with you about its effects.
I still think its going to go through. Any merger reduces competition, the FCC has to decide if it reduces it to a point that no other competitor could upset the balance, and I think that there are too many smaller competitors on the verge of going national that would fill the void of the Tmo merger. We always talk about sprint buying up some Tmo towers at auction.. but what if Metro picked them up and converted those towers and that spectrum to its channels? It could possibly be a real nationwide value carrier if it gets the right towers/spectrum... which would fill the void left by Tmobile. Theres also room for cricket, virgin, and maybe another international company like DoCoMo or Orange to try their hands in the US market.

We always talk about how it will give the big guys more power, but it will also do the same for the small guys.

posted on 10 Sep 2011, 19:46 1

12. snowgator (Posts: 3237; Member since: 19 Jan 2011)


Not sure who the other 5 suitors referred to in this story might be, but if they exist, than any logic I see to this deal is shot. I would be fine with AT&T buying them if they were the only real hope to kep them afloat, but if others are interested, than let's block this thing and give someone else who may keep them a viable 4th carrier a chance.

posted on 11 Sep 2011, 05:59

14. sonyguy (unregistered)


Time for America Movil or China Mobile to step in and mop this mess up. None of the american companies have the money to do anything useful with the assets anyway. Not att, that's for sure.

posted on 11 Sep 2011, 13:32

16. Dee808 (Posts: 7; Member since: 06 Sep 2011)


In order for the government to approve this deal AT&T might have to sell of some of TM to the regional carriers like Metro or Cricket. This would still make some money for AT&T. As for TM keeping their cell plans that would only last up to 2 years from the final merger date. After that all costumers would then be switch over to a AT&T plans. Just look at what happen to Cingular and Nextel costumers. I don't think any other carriers from around the world get in on this deal. If one of Europe's biggest company is losing money then no one from Asia or even South America would try. Must think about how laws work around the world for cell carriers. In the US government tries to keep cell carriers in check. In Other parts of the world government supports the carriers or doesn't get involved.

TM costumers will see some benefits in the beginning but as contracts expire and TM towers get converted to AT&T's LTE service thats when you are going to have problems. Or worst if you area gets handed over to the regional providers then thats when you have to buy new phones.

DT is out from the US just who will get this thats the real question.

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