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Prospects for US$39b US telecom deal darken
Source: Agencies |
November 25, 2011, Friday
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PROSPECTS for the US$39 billion sale of Deutsche Telekom's T-Mobile USA unit to AT&T darkened after the United States telecoms giant said it would take a US$4 billion charge in case of failure and the pair gave up on one avenue of regulatory approval.
The companies have not given up hope of sealing the deal but analysts said it now looks less likely than ever.
"Both companies are continuing to pursue the sale of T-Mobile USA to AT&T," the companies said in a statement released yesterday, the Thanksgiving holiday in the US.
They dropped an application for approval from the US Federal Communications Commission to focus their efforts on obtaining anti-trust clearance from the US Department of Justice - which is also opposing the transaction - without which FCC approval would be meaningless.
Yesterday's decision follows a blow earlier this week when the FCC said it would try to send the deal to an administrative law judge for review.
Acquiring T-Mobile would have vaulted second-ranked AT&T into the leading position in the US wireless market. The current industry leader is Verizon Wireless, a joint venture of Verizon Communications Inc and Vodafone Group Plc.
Sprint Nextel Corp, the No. 3 US carrier, and a regional competitor, C Spire, have also filed a lawsuit to stop AT&T's purchase of No. 4 player T-Mobile.
The deal, which would cut the number of national US mobile carriers to three, had seemed an answer to Deutsche Telekom's long quest to deal with its sub-scale US business.
But it faces tough opposition because of fears about job cuts in an environment of rising unemployment and economic hardship.
AT&T's agreement to pay T-Mobile a fee of US$3 billion plus wireless airwaves valued at US$1 billion should the deal not go through, was seen at the time as an expression of confidence that it would.
"We see it as a positive that AT&T is now providing for the break-up fee as it de-risks the scenario that Deutsche Telekom walks away from the situation completely empty-handed," said RBS analyst Lawrence Sugarman.
The DOJ, which opposes the deal on anti-trust grounds, took the case to court in August. A trial is due to begin on February 13.
Espirito Santo analysts said AT&T's decision to take the US$4 billion charge this quarter showed the company's own assessment of the chances of the deal had fallen, causing its auditors to force the company to take the charge.
The companies have not given up hope of sealing the deal but analysts said it now looks less likely than ever.
"Both companies are continuing to pursue the sale of T-Mobile USA to AT&T," the companies said in a statement released yesterday, the Thanksgiving holiday in the US.
They dropped an application for approval from the US Federal Communications Commission to focus their efforts on obtaining anti-trust clearance from the US Department of Justice - which is also opposing the transaction - without which FCC approval would be meaningless.
Yesterday's decision follows a blow earlier this week when the FCC said it would try to send the deal to an administrative law judge for review.
Acquiring T-Mobile would have vaulted second-ranked AT&T into the leading position in the US wireless market. The current industry leader is Verizon Wireless, a joint venture of Verizon Communications Inc and Vodafone Group Plc.
Sprint Nextel Corp, the No. 3 US carrier, and a regional competitor, C Spire, have also filed a lawsuit to stop AT&T's purchase of No. 4 player T-Mobile.
The deal, which would cut the number of national US mobile carriers to three, had seemed an answer to Deutsche Telekom's long quest to deal with its sub-scale US business.
But it faces tough opposition because of fears about job cuts in an environment of rising unemployment and economic hardship.
AT&T's agreement to pay T-Mobile a fee of US$3 billion plus wireless airwaves valued at US$1 billion should the deal not go through, was seen at the time as an expression of confidence that it would.
"We see it as a positive that AT&T is now providing for the break-up fee as it de-risks the scenario that Deutsche Telekom walks away from the situation completely empty-handed," said RBS analyst Lawrence Sugarman.
The DOJ, which opposes the deal on anti-trust grounds, took the case to court in August. A trial is due to begin on February 13.
Espirito Santo analysts said AT&T's decision to take the US$4 billion charge this quarter showed the company's own assessment of the chances of the deal had fallen, causing its auditors to force the company to take the charge.
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