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AT&T may sell up to 25% of T-Mobile to get the deal approved

Posted: , by Alan F.

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AT&T may sell up to 25% of T-Mobile to get the deal approved
With the Department of Justice promising to use an injunction to block AT&T's planned $39 billion acquisition of T-Mobile as we reported, Reuters is reporting that AT&T is planning on trying to settle with the government before the case reaches the court. The carrier is said to be working on a two-pronged offer to present to the DOJ, and feels confident about it, according to one source for Reuters.

During settlement talks, AT&T is expected to promise the DOJ that it would keep the relatively lower priced mobile plans offered by T-Mobile. In addition, the company would sell 25% of T-Mobile's assets. AT&T does have an incentive to work something out because if the deal fails to close, the terms of the acquisition call for $6 billion in cash and assets to be paid to T-Mobile's German parent Deutsche Telekom.

The government is concerned that if the deal goes through as currently proposed, 3 companies would control 90% of the cellular industry in the U.S.with AT&T leapfrogging over current leader Verizon. But even an asset sale by AT&T might not help sway the DOJ because only Verizon and Sprint, the nation's third largest carrier, could want to and afford to buy such a large chunk of T-Mobile. Both of those companies are already big enough that a purchase of a quarter of T-Mobile could trigger anti-trust investigations of that transaction, which would ruin the whole idea behind the divestment by AT&T.

As far as the court case that AT&T is eager to start against the DOJ,
U.S. District Judge Ellen Segal Huvelle in Washington, D.C was chosen at random. She is known to work quickly, a point in favor of the carrier which has asked for an expedited hearing. Experts say that a trial could start in two months unless AT&T is successful with its settlement offer.

source: Reuters

38 Comments
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posted on 01 Sep 2011, 23:26

1. jhgkiu (Posts: 21; Member since: 31 Aug 2011)


sprint should buy it

posted on 02 Sep 2011, 13:05

24. HockeyDood (Posts: 63; Member since: 14 May 2010)


Not gonna happen. T-Mo and Sprint don't use the types of cell radios. GSM for T-Mo and CDMA for Sprint.

posted on 03 Sep 2011, 04:37

36. remixfa (Posts: 13902; Member since: 19 Dec 2008)


they wouldnt need to. basically they would just tell the tmo customers that they buy that they have to upgrade and give them a free upgrade for the trouble. (thats what i would do). Then they just convert the towers that the get in the puchase to CDMA/wimax and they are done with it unit LTE launches. Converting 25% of tmobile is much easier than converting all of it.

posted on 01 Sep 2011, 23:46

2. wolfordtw (Posts: 16; Member since: 17 Aug 2011)


Yay! Here we go again. whah we wanna buy Tmobile just so sprint cant. Whah doj isn't letting us. Whah we want a wireless monopoly. Whah.

posted on 02 Sep 2011, 00:02 2

3. brant (Posts: 24; Member since: 08 Aug 2011)


I think it better for this deal to fail and then have att give tmo those 6bill in cash and spectrum/roaming then go throught. There more benefit to them saying as the 4th independent carrier then to become at&t&t.

posted on 02 Sep 2011, 00:08 2

4. Tark (unregistered)


This is an att scam. They are hoping to win approval by "agreeing" to sell a quarter of T Mobile, getting approval, then not being able to find a buyer that will agree to their terms. And the terms will be impossible. And even if they actually sold a quarter of it, it would be some rural spectrum, other "other assets" that are not even spectrum or customer related, ie, real estate etc. I hope the DOJ doesn't bite.

posted on 02 Sep 2011, 00:30 1

5. Droid_X_Doug (Posts: 5591; Member since: 22 Dec 2010)


Um.... Memo to AT&T: Guys, you can't turn a pigs ear into a silk purse.

An anti-competitive deal with an anti-competitive remedy (25% sale of T-Mobile assets) is still an anti-competitive deal.

Time to break out the check book and write that check to DT.

posted on 02 Sep 2011, 02:18 3

13. ardent1 (Posts: 1991; Member since: 16 Apr 2011)


The deal is not as anti-competitive as it looks on paper. It is a known fact the big boys (Verizon, ATT, etc) rent out their network to other carriers such Net10 or Tracfone, etc.

I think the DOJ is mis-using the Herfindahl–Hirschman Index in this case. Controlling the assets shouldn't be the definition of marketshare. Neither should be the concentration of profits. If anyone researched the DOJ's case against IBM, you will run into similar arguments.

My guess is that ATT/T-Mobile merger will go through and Sprint will win big time. If DOJ let Verizon acquired Alltel in 2009, this ATT/Mobile deal will also get done.

posted on 02 Sep 2011, 13:43 2

25. Eric K. Sermon (unregistered)


Your statement is extremely flawed and/or you haven't done your homework.

Here's why:

1. Net10, Tracphone, Virgin, Boost, PagePlus, etc. are either owned, subsidized, or renting off the major cariers. It is anti-competitive because no matter how you look at it, the major carriers control what these MVNOs charge. Verizon raises it's wholesale rate, that means Page Plus and Straight Talk go up. Your point is either moot or irrelavent, no matter how you look at it.

2. The Verizon acquisition of Alltel is nowhere near the spectrum as this. Alltel was a regional carrier who operated in multiple markets, but not nationwide (barring roaming agreements). The equivalent, per say, would be if AT&T was buying U.S. Cellular. Nobody would care. But, unlike Alltel, T-Mobile is a nationwide carrier operating in every state. AT&T puts a spin on it like they NEED T-Mobile to fill coverage gaps, which is total b******t. As a T-Mobile customer, any time you leave a metro, you roam off of AT&T towers. This is a deal where the giant is trying to stiffle the competition, nothing more, nothing less.

3. Sprint will not want the bits and pieces that AT&T leaves behind, because it will be hot trash. Sprint wants all or nothing, and I guarantee Verizon cares nothing for it as well, considering it would be overlap coverage anyway. The only way any carrier will eat the leftovers is if the government orders AT&T to fire-sale it, and that would remain to be seen.

Your post makes you sound like an AT&T troll, which for your own sake, I hope you are not.

posted on 02 Sep 2011, 19:56 2

32. ardent1 (Posts: 1991; Member since: 16 Apr 2011)


@ Eric K. Sermon

You didn't do your homework on the Herfindahl–Hirschman Index and its implications and now you are accusing me I didn't do my homework? Let's set the record straight for people like you who don't understand how the DOJ can automatically challenge a merger.

What is the HH index?
"... a commonly accepted measure of market concentration. ... The HHI takes into account the relative size and distribution of the firms in a market and approaches zero when a market consists of a large number of firms of relatively equal size. The HHI increases both as the number of firms in the market decreases and as the disparity in size between those firms increases."
(source: DOJ)

How does DOJ use HH Index to challenge mergers:
"Markets in which the HHI is between 1000 and 1800 points are considered to be moderately concentrated, and those in which the HHI is in excess of 1800 points are considered to be concentrated. Transactions that increase the HHI by more than 100 points in concentrated markets presumptively raise antitrust concerns under the Horizontal Merger Guidelines issued by the U.S. Department of Justice and the Federal Trade Commission." (source: DOJ).

The problem with the HH Index has always been what is the correct measurement of market share? I've argued previously that neither profits nor assets should be the acid test. Now, let's go over the flaws in your arguments.

1. Net 10 or Tracfone is NOT the same as VirginMobile or Boost, etc since the latter two companies are subsidiaries of Sprint -- the distinction here is between independent concerns and subsidiaries of a major wireless carrier. Therefore, when you look at companies like Net 10 or Tracfone, that don't have physical towers or sprectrum, I argue that their use of the total sprectrum should be carve out when calculation the HH Index. The fact that Verizon or ATT et al controls the rates charged to the Net 10's of the world, doesn't change the fact once the sprectrum is rented out, there's less spectrum to Verizon or ATT et al. As a result, this is NOT a moot point given Net 10 or Tracfone offers (as a general comment) cheaper prepaid service than Verizon or ATT et al, respectively.

2. Since you now understand about the HH Index, it's NOT about the absolute sprectrum, it's about the MARGINAL sprectrum and resultant impact on the HH Index, respectively. Under that definition, Verizon's acquisition of Alltel was anti-competitive AND if I remember correctly Verizon had to divest certain Alltel assets. Again, it's how the "market share" is defined because in certain markets the combine Verizon-Alltel entity had overwhelming market power!!

3. Sprints wants spectrum. Since spectrum is limited, that spectrum has value. Additionally, Sprint knows from the Alltel asset divestiture, some of the these assets have significant value.

In conclusion, please do your homework before you look like an idiot.

posted on 03 Sep 2011, 10:39

37. donpeppino9 (Posts: 67; Member since: 24 Jan 2010)


thank you. finally someone who thinks with their brain and not their balls. as much as dorks on this website hate att for running a solid business plan that doesn't appease the hardcore users, the reality is that this deal is legal, fair, and isn't anti-competitive.

Yes competition will be reduced slightly, but the affect will not be significant enough raise anti-trust issues.

Tmobile was for sale. there wasn't a hostile takeover. the bidders were sprint and att, and att won the bidding. simple as that.

posted on 03 Sep 2011, 15:29

38. remixfa (Posts: 13902; Member since: 19 Dec 2008)


all of you have made good points and bad points.

The HH Index is a great measure for sure

The legality of the deal is still being decided. Thats the FCCs role in all this. If its found to be legal either with or without concessions, the deal will finalize.

Sprint would likely buy up the remaining Tmobile account. There is no reason they wouldnt. It would give them spectrum and towers on the cheap.

Is the merger a good thing or bad thing? Noone knows for sure. Most of us feel its a bad thing. I think on the SHORT term it will be good for both Tmo and ATT customers that are under contract as they will get increased service with no extra cost. On the long term, who knows. The general assumption (including mine) is that its a very bad thing for the over all balance and pricing of the US wireless industry. ATT (however unlikely) could actually lower their prices a bit but we wont know for sure until it happens. Reduced competition means that further price reductions are less likely as there is less pressure to reduce them.

posted on 02 Sep 2011, 00:33

6. snowgator (Posts: 3197; Member since: 19 Jan 2011)


Since it seems AT&T is beyond desperate for this deal, get the coals out and force their feet there. Require the 25% they are going to sell off to be awarded to smaller carriers at pure HP Touchpad firesale type prices. Make AT&T give a strict, deal dependant itemized list of what they are going to do with what spectrum of not only what they will get from T-Mobile, but what they already own and refuse to allow them to "sit" on any spectrum which is not going to be used in the next 24 months under the threat of serious fines. Make them put in writing they will not let go any of their current employees or those from T-Mobile for the same 24 month period. And ensure from them there will be at least one set of lower cost plans similar to what T-Mobile offers.

GO GET 'EM FEDERAL HUNTIN' DOGS!!!

posted on 02 Sep 2011, 02:02

12. Droid_X_Doug (Posts: 5591; Member since: 22 Dec 2010)


@snow - there is still the problem of an anti-competitive deal. Even with the restrictions you propose, it is still an anti-competitive deal. AT&T just has to suck it up. Write the check to DT, take the hit to the share price (no bonuses this year) and move on.

posted on 02 Sep 2011, 05:33

14. snowgator (Posts: 3197; Member since: 19 Jan 2011)


I agree that is the best solution, Doug, I just doubt it is the solution that will happen. At some point, Parent Company D.T. (won't insult them pretending I can spell it right) will get involved. They want this deal- it is the only deal which will get them completely out from under T-Mobile and give them cash in hand to work in the European market where they want to be anyway. D.T. will start threatening to pull the plug on T-Mobile due to it's lack of desire to keep funding it. Than the FCC will be put under pressure to approve this. Might as well squeeze as much out of AT&T as they can. I just feel it ends up getting approved instead of leaving T-Mo out to twist in the wind, looking for another buyer that just isn't there.

posted on 02 Sep 2011, 10:12

21. waveydavey (unregistered)


no bonuses *snicker*

posted on 02 Sep 2011, 00:46 3

7. Forsaken77 (Posts: 547; Member since: 09 Jun 2011)


AT&T can't manage what they have now. And they want more?

posted on 02 Sep 2011, 13:46

26. Eric K. Sermon (unregistered)


Most honest comment on here, and that is really saying something...

posted on 02 Sep 2011, 01:21

8. CluckCluckNAway (unregistered)


A friend of mine that worked for AT&T/SBC Global/Pacific Bell once mentioned that the execs (former SBC Global execs, not old AT&T execs) are whiny carry-overs from the 80's that feel entitled to government perks. I guess he is right.

posted on 02 Sep 2011, 01:27 1

9. tehgyb (unregistered)


Maybe the doj should block the deal then dt should sell Tmo to a player not currently in the cellular field such as say time Warner or some other big player in non mobile communication that may be looking to invest in the mobile market.

posted on 02 Sep 2011, 01:45

10. Droid_X_Doug (Posts: 5591; Member since: 22 Dec 2010)


@tehgyb - you might be on to a solution. But AT&T being able to get an anti-competitive 'gift' doesn't seem to be in the cards at the moment.

posted on 02 Sep 2011, 01:48

11. iblackdroid (Posts: 67; Member since: 19 Jul 2011)


I want verizon to buy sprinttt! lol then verizon would BRUTALIZE att
And they will have double 4G like att, LTE and WiMax :)

posted on 02 Sep 2011, 12:07

22. gomulkaaa (Posts: 21; Member since: 02 Sep 2011)


What are you, like 12 years old?

posted on 02 Sep 2011, 05:47 3

15. Kenshiro (unregistered)


This is a ruse, AT&T will just buy back the 25% afterwards. Some will argue that DoJ is wrong to intervene, but who is going to speak for all the loyal T-Mobile customers that don't want their prices gouged and plans broken up in separate products?

Hmm. Let's take a look at AT&T's plans

$70 for unlimited talk
$20 for unlimited messaging
$45 for 4GB data

How much do I pay for unlimited talk, text and web (5GB) at T-Mobile? $85/mo before taxes

In short, f*** you AT&T.

posted on 02 Sep 2011, 09:47 1

18. BLikens1619 (Posts: 53; Member since: 12 Apr 2008)


I pay $30 for unlimited talk, its included with unlimited family messaging.

posted on 02 Sep 2011, 09:50 1

19. BLikens1619 (Posts: 53; Member since: 12 Apr 2008)


You can get a 450 minute plan to use to call landlines for $39.99, $20 for unlimited text and calling to any mobile, and $25 for 2GB of data, hmm, thats $84.99.

posted on 02 Sep 2011, 13:48 1

27. Eric K. Sermon (unregistered)


Quit defending AT&T, that's still too much.

Original poster has a great point.

posted on 02 Sep 2011, 20:48

33. biscutbob (Posts: 82; Member since: 08 Jul 2011)


You have to have the 900 indivual plan or the 700 family plan or higher to get the mobile to any mobile

posted on 02 Sep 2011, 22:50 1

34. ardent1 (Posts: 1991; Member since: 16 Apr 2011)


You're an idiot if you think ATT can repurchase the 25% once it gets divested. Those deals require regulatory authority.

BTW, you can get unlimited 3G data and messaging for $35 from virgin mobile. I pay $25 a month with my motorola triumph so it's a good deal.

posted on 02 Sep 2011, 09:11 1

16. Laron (unregistered)


Forsaken77 is correct, AT&T can't handle what they have now. AT&T's only purpose for doing this is for the money that they will get out of the deal if it goes through. The good thing is if the deal does go through you will see a lot of people jumping ship to Verizon and Sprint. Verizon is giving $100 port in credits while Sprint is giving $125 port ins to smartphones. If AT%T was really concerned about their customers and employees (which they're obviously not) they would improve their current spectrum; creating jobs and bringing them done from being #1 in dropped calls.

posted on 02 Sep 2011, 09:15

17. Laron (unregistered)


*AT&T
-bring them down (not done)

posted on 02 Sep 2011, 10:01

20. Geeksarebest (Posts: 34; Member since: 28 Jun 2011)


I think you all forget that there will be divestures. I think this is more along the lines of posting the 25% that they'd normally be divesting anyways in order for it to be bought by a smaller company instead of marketing it directly to Verizon like prev. divestures. It makes sense. Sprint was too cheap to bid out AT&T on the purchase so maybe they'd be happy with a lambs share instead of the lion's.

posted on 02 Sep 2011, 13:53 1

28. Eric K. Sermon (unregistered)


Doubtful.

Who wants pieces of a spectrum and knowing they will be forced into roaming agreements with AT&T when the dust clears?

As previously seen with the Verizon/Alltel deal, AT&T dropped the ball big-time on what it acquired, while the small companies that got what AT&T didn't want are still mismanaged to this day.

Many people in the industry learned from these mistakes, and the lesson is: divested cellular markets are not the golden goose, but the rotten egg.

posted on 02 Sep 2011, 23:01 1

35. ardent1 (Posts: 1991; Member since: 16 Apr 2011)


What you never did understand is that who ever gets that spectrum did not have to pay market prices or overvalued prices due to animal spirits during the bidding process. The best candidate to pick the spectrum is Sprint and Sprint knows that.

I was on the financing side when Dish was trying to launch its first satellite. I was also there witnessing how the pager industry got wiped out. It's clear to me you may sound smart but you AREN'T smart and that is all the difference. Like I wrote earlier, spectrum is limited and therefore it has value. That spectrum has more value now its being acquired on the cheap.

posted on 02 Sep 2011, 12:45

23. bolaG (Posts: 468; Member since: 15 Aug 2011)


Making a Big Red vs a Big Blue will make our cellular industry horrible. Less competition is not going to help the end consumer guys. I vote no to the original proposition and to the new one as well.

posted on 02 Sep 2011, 14:37

29. Forsaken77 (Posts: 547; Member since: 09 Jun 2011)


You're all assuming that AT&T will sell off spectrum. They may not. It only says they will sell 25% of TMo. They may sell other assets such as tower locations where TMo and AT&T overlap or are rite next to each other. They could sell anything and keep all the spectrum themselves. I have AT&T and can't stand em. But I like the phones they have.

posted on 02 Sep 2011, 16:57

30. Atrix 4g (unregistered)


Sell that 25 percent to a smaller carrier, the next one in line, metropcs if they get that they will join the big 3 as the next big carrier, then now they have a better chance to step it up and competition will be the same even better, since the metro will go full throttle to take advantage.

posted on 03 Sep 2011, 21:07

39. YoungHung (unregistered)


Sell it to VZW!!!

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