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T-Mobile may lose $6b break-up deal if DOJ stops AT&T merger

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.




by MacNN Staff

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Comments

  1. qazwart

    Joined: Dec 1969

    0

    What?

    Are you telling me that T-Mobile signed a contract in which it wouldn't get a breakup fee if the DOJ didn't approve? Wasn't that almost the only way that the merger wouldn't have happened?

    The breakup fee was to compensate T-Mobile for damages it sustained if the merger didn't go through. T-Mobile's business was hurt by the prospects of the merger. For example, would Apple negotiate an iPhone deal with a company that is going to be merged with another company that already had an iPhone. Would customers join T-Mobile knowing that they'll might become AT&T customers? How many T-Mobile customers didn't renew their contracts because they might become AT&T customers anyway?

    T-Mobile leaves this deal in much worse shape than it came into this deal. Without the 6 billion in breakup compensation, T-Mobile will not be a player in the mobile phone market. In the end, we'll still lose the fourth major player in the industry no matter what happens.

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