T-Mobile wants a big break-up fee from Sprint in case deal is killed before closing

T-Mobile wants a big break-up fee from Sprint in case deal is killed before closing
T-Mobile wants to protect itself with a fairly large break-up fee, in case a deal with Sprint is killed by regulators before it closes. The nation's fourth largest carrier needed this type of protection a couple of years ago when AT&T pulled out of its $39 billion deal to buy it. The refusal of the DOJ to go along with that deal is what forced AT&T to pull out. Thanks to a previously negotiated break-up fee, T-Mobile received $3 billion in cash plus some additional spectrum, which allowed it to expand its coverage in the U.S. market. Earlier this year, Sprint chairman Masayoshi Son balked at offering a high break-up fee, saying that neither SoftBank nor Sprint could afford to pay it.

Now, as Sprint and T-Mobile are said to be negotiating a merger, T-Mobile and its majority owner are seeking a large break-up fee from Sprint in case history repeats itself. Deutsche Telekom, which owns 67% of T-Mobile, is asking for a $1 billion break-up fee and wants promises that the T-Mobile brand and some of its management team would remain after a deal closes. To that end, current speculation has T-Mobile CEO John Legere at the top of the list to run a merged Sprint-T-Mobile.

Those familiar with the thinking of the carriers involved, say that they could decide to wait until an auction of spectrum is completed in 2015, or until a new administration takes over the following year, before trying to tie the knot. Regulators like the FCC and the FTC have both admitted to be against a deal between the nation's third and fourth largest mobile operators. Still, there are those close to Sprint and its parent company SoftBank, who expect a bid for T-Mobile to be announced as soon as next month.

Next week, the FCC will make a ruling on how much spectrum a carrier can hold. If the agency ruling means that Sprint has to count more of its holdings against a cap, it could limit the amount of spectrum the operator could obtain via a takeover. That could effectively kill any chance Sprint had to purchase T-Mobile.

There could be a wild card in the whole affair. On Thursday, we told you that Dish Network CEO Charles Ergen stated that he would be interested in purchasing T-Mobile if a bid from Sprint fails to close.

source: WSJ

FEATURED VIDEO

45 Comments

1. PBXtech

Posts: 1032; Member since: Oct 21, 2013

Nothing about Sprint buying T-Mobile excites me. I came from Sprint, glad I left and want no part of them again. T-Mobile is turning things around, it would be nice if they could be left alone to continue their growth. If it flattens out, then discuss a merger, but not until then.

14. fzacek

Posts: 2486; Member since: Jan 26, 2014

+1 Agree. T-Mobile is doing so well right now and I see no reason why a merge is necessary. Sprint wants it because they are a dyeing carrier and want something to save them from doom. T-Mobile would be better off alone...

20. youlookfoolish

Posts: 193; Member since: Dec 14, 2012

T-Mobile is not doing well. They lost $50 million last quarter and $151 million this quarter. More than half of their net adds are non profitable prepaid customers. Deutsche Telecom can't wait to unload them. Glad the service works for you and a few dozen people but as a provider they are hot garbage.

25. Augustine

Posts: 1043; Member since: Sep 28, 2013

Pray, tell, how are prepaid customers paying the same for the same service as postpaid customers not profitable?

30. JEverettnow

Posts: 228; Member since: Mar 11, 2013

its not profitable because they are losing money hand over fist. Its in the income reports

33. Augustine

Posts: 1043; Member since: Sep 28, 2013

You haven't addressed my question. Do you have an answer why $50 for a prepaid plan is not profitable while $50 for a post-paid identical plan is? Are you confusing prepaid customers with contract customers, for the latter do not exit in T-mobile? Besides, do you mean to say that T-mobile has had a couple of bad quarters while it's expanded its network and acquired customers or that it's irreparably doomed to bankruptcy?

36. InfDaMarvel

Posts: 18; Member since: Oct 20, 2010

Its already a known and public fact that Tmobile is losing money while gaining customers. Sprint is losing customers while losing money. However Sprint was just brought out by another company not to long ago giving it the ability to buy Tmobile's American branch. Why are you even asking question that cant be answered in response to a fact.

37. tuminatr

Posts: 1158; Member since: Feb 23, 2009

First it’s not they have had a couple of bad quarters they have not been profitable for years. And you are correct $50 prepay vs $50 postpay is the same amount of revenue coming in. However it’s less than the rest of the carriers and that’s bad for revenue and in the long run bad for customers because they will need to make up for it somehow. Also no contract is a good deal for the customer but bad for consistent income stream for the carrier prepay customers are not as loyal and yes contracts do play a part in that.

39. Augustine

Posts: 1043; Member since: Sep 28, 2013

And I say, so what that it's bad for the company? I'm not married to T-mobile nor am a stockholder. I just contracted the service I wanted for the price I wanted. I couldn't care less that they go belly up in the long term. For my choice is to pay more now and later or less now and more later. I take the second choice. Then again, could it be that the profit margin in the US is just too freaking huge? How come that mobile plans in the US are twice and even thrice as expensive as in Europe or Latin America? Carriers in those places are not folding left and right, so there seems to be a lower price point that profit and investments still happen.

40. tuminatr

Posts: 1158; Member since: Feb 23, 2009

I would like to note first that I am in no way saying you made a bad choice but be honest when consumers buy based on price the minute a better price comes around that offers the same quality you will switch. This is my point companies selling based on price (like t-mobile) is much harder to make money because you become a commodity and are easily replaced. And I know this is basic economics but companies are machines to make money the good ones provide great benefits to their customers and employees. As for profit margins you are trying to compare the US carriers to the foreign cell companies. The biggest thing we forget it USA is a much more rural country and to do business here you need to provide service everywhere. Go look at a coverage map of the USA and now UK, France, Mexico, Canada, etc, etc. In many other countries go rural and don’t expect coverage. We have more land and more towers and that costs more money to build and maintain. Customers expect their phones to work in the middle of rural Nebraska and Montana. So with the population more spread out it’s more expensive to provide cell service for them. The other side to this is we do have more regulation than any other country I can think of and this is costly for the consumer. The upcoming 600mhz auction will generate maybe 100 billion for our government and who ends up paying that, yep the US consumer. Some countries give away the air waves and many it is much cheaper than the USA

42. Augustine

Posts: 1043; Member since: Sep 28, 2013

As I said, I don't invest my money in T-mobile, I just contracted a service from it. My approach is not what I can do for T-mobile, but it can do for me and for how much. It is a choice by particular companies to grow beyond and above its competitors. Such companies will have a much higher cost for the reasons you stated, but it is their choice. As a consumer, it's up to me whether that's a relevant factor for me or not. Other companies, like T-mobile, chose otherwise. It doesn't seem to be going after the remaining 10% of the population just because it can. This way, its fixed costs are lower than its competitors and it can offer a lower price. Or at least I think so. On a side note, the size of these US is a great reason why there should be a dozen major carriers and why four still reeks of a virtual cartel. Smaller countries might very well be satisfactorily serviced by four major carriers, as it seems to be typical in Europe, but American consumers in different areas have different needs and cannot have their needs serviced for the best price with so few choices. Unfortunately, big American corporations learned the lesson from a century ago and now carefully prop up an appearance of competition, like a duopoly, with the tacit approval of politicians suitably bribed with campaign contributions. We the people are worse for it.

43. tuminatr

Posts: 1158; Member since: Feb 23, 2009

I understand you don’t have stock in t-mobile I don’t either. I was just trying to answer your question “Pray, tell, how are prepaid customers paying the same for the same service as postpaid customers not profitable?” I just don’t think that people would buy service from a bunch of small carriers. And if this is what you believe you should look at Sprints rural carrier alliance closely they are trying to bring back something like the old cellular one (if you not familiar it was franchised service under one brand name). When people want a cell carrier they just want simple most people will even pay more for simple, hell that’s what Apple has based its whole product experience on make a good product and make it simple and they even take away options and people see it as a less complicated and better product. If you believe T-mobile is doing something different you are drinking the Kool Aid. They are doing something different but in their own best interest. Full price no contract phones are because they were losing their shirts on upfront costs of phones. Prepay and not contract service is because you can’t commit someone to a service if they receive nothing for their commitment. As for price and coverage there are many prepay carriers out there and they all offer similar $40 to $55 unlimited everything prices. I just don’t understand they hype Now to your claims of crony capitalism there is a little truth here but you can’t have that kind of capitalism without a very big government. Think about it if the FCC gave away the spectrum rather than charge for it, if the telephone regulations were less so smaller companies could compete against the big ones then the market would be better for the consumer. So to fix this you need a smaller and less intrusive government. I for one don’t see any support for that I just see people saying companies are evil. And yes I realize you did not say that or maybe even mean it but that how many, well maybe even a majority of Americans think

2. darkkjedii

Posts: 31529; Member since: Feb 05, 2011

Dear phonearena.com. These popup ads are ruining the sites experience.

6. Planterz

Posts: 2120; Member since: Apr 30, 2012

What popup ads? Oh yeah, I forgot. There's still some people who've never heard of AdBlock. Or could it be that you're using (*snort*) IE?

8. dontneedtoknow

Posts: 158; Member since: Feb 17, 2014

please explain to me how to get that on a phone!

9. Planterz

Posts: 2120; Member since: Apr 30, 2012

Oh yeah, I didn't think about that. Those translucent overlay popups are horrible (if that's what you're seeing) and a PITA to close. There's a couple adblockers (AdAway, Lucky Patcher) for Android, but they require root. They're not 100% on all sites, but I never see ads or popups on my phone or tablet when browsing Phone Arena.

13. 0xFFFF

Posts: 3806; Member since: Apr 16, 2014

On Android, you can just use Firefox and AdBlock. No root required.

16. engineer-1701d unregistered

its a hack on rooted phones try ad away or ad blocker app you need a few extra steps but it works.

23. kanagadeepan

Posts: 1273; Member since: Jan 24, 2012

Use javlin browser...

45. givemetacos

Posts: 16; Member since: May 12, 2014

IE actually does have access to Adblock Plus By default it doesn't even come with the white list of allowed ads like it does for chrome, firefox, etc.

10. Jommick

Posts: 221; Member since: Sep 10, 2013

Mercury browser is a solid alternative to safari on iOS and it has ad blocker

12. 0xFFFF

Posts: 3806; Member since: Apr 16, 2014

If you use an iDevice you have to pay the iPenalty.

15. fzacek

Posts: 2486; Member since: Jan 26, 2014

I hate them so much. They pop up every five seconds and are impossible to close...

41. tuminatr

Posts: 1158; Member since: Feb 23, 2009

use firefox and ad block plus and suddenly no popups

3. ckoch125

Posts: 193; Member since: Oct 29, 2012

So they use it to expand like when the att merger fell through

17. engineer-1701d unregistered

remember att and cingular after it was great and now 1 or 2 tops only because the merg, well dan hess will be gone m.son whats asian style network meaning fast cheaper lots of people like in japan, and john will run it i will still switch next month to tmobile but if it came together we will be grandfarthered in to the speed and stuff.

4. Augustine

Posts: 1043; Member since: Sep 28, 2013

It seems that T-mobile's greatest source of profits is set to be break-up fees.

5. downphoenix

Posts: 3165; Member since: Jun 19, 2010

I hope Sprint is dumb enough to proceed with it, they deserve the kick in the groin this would be.

7. Totse2k15

Posts: 478; Member since: Feb 11, 2014

I like John Legere. He is nice, cool and sexy! I wish him the best if T-Mobile merged with Crapsprint or some [s]hit happen.

35. pokerc

Posts: 60; Member since: May 24, 2012

You know him personally?? Lol

Latest Stories

This copy is for your personal, non-commercial use only. You can order presentation-ready copies for distribution to your colleagues, clients or customers at https://www.parsintl.com/phonearena or use the Reprints & Permissions tool that appears at the bottom of each web page. Visit https://www.parsintl.com/ for samples and additional information.