Tag Archives: break-up-fee

Will AT&T Pay a Break Up Fee to T-Mobile?

According to a news item making the rounds this morning, AT&T may well be on the hook to the tune of 6 billion bucks if the proposed merger with T-Mobile isn’t approved by the FCC. If the feds refuse to allow the $39 billion deal to go through, AT&T will pay out $3 billion in cash, $2 billion in specturm and yet another billion in the form of a roaming agreement. All of this dough will apparently be offered up as a “break up fee,” which likely enticed T-Mobile to agree to this deal in the first place. It’s a win-win situation for the company, after all. Even if they lose, they are still coming out ahead in a very big way.

This high amount proves that AT&T is pretty confident that they can convince regulators to approve the proposed deal. Companies such as Sprint, of course, are vehemently opposed to the sale. The cash portion of this deal alone is worth nearly 8% of the total deal price, and the addition of the assets and services mean that these two companies are smashing previous records when it comes to break up fees.

Your mouth is likely hanging wide open after reading these numbers. Think of it from T-Mobile’s point of view, though. The deal is not just about them making boatloads of money… their services would be drastically improved by joining with AT&T. If the sale doesn’t go through, the company stands to still languish as a lesser provider. The spectrum fee alone will pay for about 10 megahertz of spectrum. This is the absolute minimum required to offer high-speed wireless service to consumers.

That 10 megahertz would more than DOUBLE T-Mobile’s current available specturm for your high-speed services, y’all. The company would then be able to increase data speeds by about 1 1/2 times over what you are used to now. 20 megahertz would increase speeds by nearly four times. In a time when data speeds are important to all of us when choosing a provider, losing out on the chance to merge with AT&T will still allow T-Mobile to become much more competitive – without having to raise their prices in order to do so.

What are your thoughts on the entire proposal? Are you in favor of the deal, or against it? Do you believe that these extremely high break up fees are within the realm of normal these days?