updated 03:00 pm EDT, Thu May 12, 2011
ATT paying 6b break-up fee if T-Mobile deal halted
Two contacts said Thursday that AT&T's buyout of T-Mobile could be expensive even if blocked by the US government. Terms in the deal reportedly require AT&T pay T-Mobile a $6 billion breakup fee if it can't be completed. Reuters understood that, while $3 billion in cash was already public, there would still be a deal for $2 billion in spectrum and a $1 billion roaming deal.
None of the terms were confirmed by AT&T or T-Mobile.
T-Mobile has singled out wireless spectrum as one of the reasons for agreeing to being bought out and, during Wednesday's Senate hearing, claimed it couldn't implement LTE-based 4G at all because it didn't have frequency in a low enough frequency to give good performance. A spectrum clause in the breakup fee would be a hedge against this, since T-Mobile would likely get access to frequencies it could use for LTE even if forced to fend for itself.
AT&T itself has cast the deal primarily as a hunt for spectrum and tried to convince senators at the hearing that its usable airwaves were hitting their limits. Critics at the presentation, including Sprint CEO Dan Hesse and Cellular South CEO Victor Meena noted that AT&T had large amounts of unused spectrum. Advocacy group Public Knowledge called AT&T a "serial acquirer" that buys carriers instead of focusing more on improving its existing network.