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AT&T may sell off T-Mobile assets to gain approval for $39B merger

Matt Hamblen | Nov. 30, 2011
Analysts are dubious that latest tactic can help AT&T overcome DOJ, FCC objections to T-Mobile deal.

AT&T could be negotiating to sell off as much as 40% of T-Mobile USA assets in an effort to to garner Department of Justice approval of its imperiled $39 billion acquisition of the Deutsche Telekom unit.

Several analysts interviewed Tuesday questioned whether AT&T's latest tactic will persuade the DOJ and a federal judge to approve the merger. The merger had appeared to be on life support last week following the release of a negative draft report from the Federal Communications Commission.

"I heard [AT&T] will sell off as much as 40% of T-Mobile assets, but that makes you wonder if [doing that] is worth the trouble," said Phillip Redman, a Gartner analyst.

He noted that AT&T would have to negotiate any asset sale with the DOJ. If AT&T has to give up too many wireless spectrum rights in U.S. cities, "it may not be worth having the merger," Redman said.

Media Access Project, which has consistently fought the proposed merger, issued a short statement saying that "AT&T has lost touch with reality" in considering selling T-Mobile assets to win DOJ approval. MAP also contended that one potential buyer of the assets, Leap Wireless, doesn't have the capital to be able to afford such a deal.

The DOJ filed a lawsuit against the merger in U.S. District Court for the District of Columbia on the grounds it is anticompetitive. According to a court clerk, a status hearing in the case before federal Judge Ellen Huvelle that had been set for Wednesday has been postponed until Dec. 9. The delay sparked speculation that AT&T is negotiating with the DOJ about a possible asset sale.

Any T-Mobile assets in play would include customers and wireless spectrum in various U.S. cities that would be sold to smaller carriers, perhaps to fifth-ranked Metro PCS or Leap Wireless, according to speculation by analysts and a Bloomberg Business Week report that cited unnamed sources.

AT&T didn't respond to a request for comment on the reports it is looking to sell off pieces of T-Mobile.

Last week, AT&T and T-Mobile parent Deutsche Telekom withdrew merger-related applications before the Federal Communications Commission following the FCC's draft order calling the merger anticompetitive and not in the public interest.

In addition, AT&T said it would take a $4 billion accounting charge in the fourth quarter in case it has to pay break-up fees to Deutsche Telekom if the transaction doesn't win regulatory approval.

The $4 billion payment would include $3 billion in cash and $1 billion for the current book value of spectrum that would be transferred.


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