T-Mobile may miss out on AT&T break-up fee, report says
AT&T may be able to get out of paying a $6 billion break-up fee to Deutsche Telekom if the T-Mobile USA deal falls apart.
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Roger Cheng (he/him/his) was the executive editor in charge of CNET News, managing everything from daily breaking news to in-depth investigative packages. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade and got his start writing and laying out pages at a local paper in Southern California. He's a devoted Trojan alum and thinks sleep is the perfect -- if unattainable -- hobby for a parent.
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Many in the industry expected AT&T to complete the acquisition, swayed by the unusually large break-up fees. Those fees are typical of M&A deals, ensuring some protection to the seller if the transaction falls through. But the large size, which includes $3 billion in cash and the balance in services, assets, and a roaming agreement, suggested AT&T was confident in its ability to close the deal.
The break-up fee would only be paid if certain conditions were met, Reuters said. The deal has to receive regulatory within a certain time, or the contract is deemed void. The value of T-Mobile also can't fall under a certain level, which could happen if the government requires that parts of the business have to be sold to get the deal approved.
Without the break-up fee, Deutsche Telekom is left with a weakened T-Mobile that has been hurt by the publicity over the pending deal. Despite offering price cuts and promotions, T-Mobile continues to lose its most valuable contract customers at an alarming rate. In addition, it lacks the spectrum to build its own true 4G wireless network.
The deal has proven to be a contentious issue. AT&T has argued that the deal is necessary to increase its spectrum position and allow for a wider deployment of 4G services, and has boasted supported from several states, its unions and technology companies. But opponents such as Sprint Nextel, consumer advocate groups and other wireless companies have argued that the deal would hurt competition and innovation in the industry.