AT&T's (T) Logic in T-Mobile Deal is Baffling
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According to Bloomberg late Friday, AT&T might seek to divest up to 40 percent of T-Mobile, currently owned by Deutsche Telekom (OTCBB: DTEGY), in an effort to recoup some of the $39 billion expected to be spent in the deal.
But AT&T may also be looking to calm the nerves of U.S. regulators, who have sued AT&T in an effort to block the deal. The Department of Justice previously had said the merger would "substantially" lessen the amount of wireless competition in the U.S. Last week, AT&T disclosed it will take a $4 billion charge related to a potential break-up fee, as the Federal Communications Commission (FCC) also attempted to block the deal.
Both AT&T and Deutsche Telekom submitted requests for dismissal of the deal without prejudice, meaning the two would be able to continue discussion and submit a ratified proposal down the line. The requests were made to allow the two time to better focus on Department of Justice concerns.
Divesting assets worth some $15 billion, won't be easy. The pool of potential buyers is small, and it's likely they'll undergo their own government scrutiny for any proposed acquisition.
Now, a few off-the-cuff thoughts.
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But AT&T may also be looking to calm the nerves of U.S. regulators, who have sued AT&T in an effort to block the deal. The Department of Justice previously had said the merger would "substantially" lessen the amount of wireless competition in the U.S. Last week, AT&T disclosed it will take a $4 billion charge related to a potential break-up fee, as the Federal Communications Commission (FCC) also attempted to block the deal.
Both AT&T and Deutsche Telekom submitted requests for dismissal of the deal without prejudice, meaning the two would be able to continue discussion and submit a ratified proposal down the line. The requests were made to allow the two time to better focus on Department of Justice concerns.
Divesting assets worth some $15 billion, won't be easy. The pool of potential buyers is small, and it's likely they'll undergo their own government scrutiny for any proposed acquisition.
Now, a few off-the-cuff thoughts.
- Why AT&T doesn't just aim to acquire 60 percent of T-Mobile is something only AT&T can answer.
- Why doesn't AT&T just aim to acquire MetroPCS (NYSE: PCS) and Leap Wireless (Nasdaq: LEAP)? The duo have about 14.9 million subs (about half of the ~33 million T-Mobile has), though most are lower-margin prepay customers, but their market cap is about $3.3 billion combined, so assume a possible $4 billion price tag (aka - equal to the charge AT&T is expected to take just in case the T-Mobile deal falls apart).
- Buy Clearwire (Nasdaq: CLWR). Sprint (NYSE: S) has a 51 percent stake in the company, and Clearwire only owns about 27 percent of itself, but the stock has been hit following rumors of capital infusion, M&A with Sprint, new business, etc., putting it's market cap at $300 to $400 million. With reported subs of about 9.54 million last quarter (the lions share being wholesale subs), it could be a cheap pickup.
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