updated 07:45 am EDT, Mon September 5, 2011
T-Mobile could lose break-up fee if merger fails
T-Mobile may lose its multi-billion dollar break-up fee if its purchase by AT&T is successfully blocked by the Department of Justice, according to a new report. AT&T was to pay T-Mobile $3 billion in cash and another $3 billion comprised of the estimated value of certain spectrum and a national roaming agreement. The break-up fee is in real danger of collapsing if certain conditions aren't met, and T-Mobile could be left with nothing to walk away with.
"There are a number of options under which the (break fee) contract will not come into effect," the person, who is familiar with the contract, told Reuters on Monday.
For T-Mobile to land the break-up fee, its acquisition by T-Mobile needed to receive regulatory approval within a certain timeframe. Should that fail to be met, the contract is reportedly void. Regulators could also require parts of T-Mobile to be sold, but this could result in its value increasing, again putting the break-up fee under threat.
The Department of Justice, which has sued to stop the merger, is currently in talks with both companies. A merger may yet be on the table, but it is unknown at this point what form it could take and remain viable.
AT&T has been hastily prepping an alternative to the original deal, hoping that it can still reach an amicable arrangement so that the Department of Justice green lights the merger.