dslreports logo
 story category
AT&T Likely Won't Pay T-Mobile Deal Failure Fee
Deal Riddled With Small Protection Conditions

We noted some time ago that should AT&T's planned $39 billion acquisition of T-Mobile fail, AT&T could be on the hook for $3 billion in cash, plus another $4 billion in spectrum and network sharing obligations. Of course this is AT&T, and their lawyers have worded the contract in just such away so that AT&T likely won't have to pay a dime. According to an anonymous source speaking to Reuters, the fee only gets paid if the deal gets approved within a certain amount of time, and if T-Mobile's value doesn't drop below a certain level. With the DOJ looking to block the deal (though it still may get through) and wary T-Mobile users already fleeing to other companies, it seems likely that AT&T may not have to pay a dime. AT&T will have spent a small fortune in lobbying and legal costs, but AT&T's worst-case scenario is that they've left a competitor in considerably worse shape.

view:
topics flat nest 

fuziwuzi
Not born yesterday
Premium Member
join:2005-07-01
Palm Springs, CA

1 recommendation

fuziwuzi

Premium Member

...left a competitor in considerably worse shape

Which would not surprise me was the goal all along. AT&T are some of the slimiest SOBs on the planet. They care nothing for workers or customers, they would slit their mother's throats for a 0.1% bump on the stock market.

n2jtx
join:2001-01-13
Glen Head, NY

n2jtx

Member

Re: ...left a competitor in considerably worse shape

said by fuziwuzi:

AT&T are some of the slimiest SOBs on the planet. They care nothing for workers or customers, they would slit their mother's throats for a 0.1% bump on the stock market.

I couldn't agree more. The old "Ma Bell" AT&T was a company I respected and it bothers me that this "SBC" incarnation of AT&T is such a slimy company. I am all for free markets but I am opposed to bad behavior, even if legal. I would have had more respect for AT&T if they just came out and said what was really true; "we are buying to T-Mobile to eliminate a competitor and there is nothing illegal about that.".

m35g35
@spcsdns.net

m35g35

Anon

Re: ...left a competitor in considerably worse shape

And the deal is illegal according to the DOJ filings. Something to do with the Anitrust laws. I do agree that AT&T is very slimy company these days. All about the greed!
fiberguy2
My views are my own.
Premium Member
join:2005-05-20

fiberguy2 to n2jtx

Premium Member

to n2jtx
Really? You "respected" the "old Ma Bell"...? I'm guessing you're either pretty young, or perhaps your own name wasn't the one listed on any AT&T (MaBell) bills?

The old AT&T was just as bad as this new one is, sorry to say.

... "we're the phone company, we don't have to care."

Any company that is forced to be broken up, in my book, isn't a company worth respecting. And, that's just a way to summarize that whole era up. The original AT&T had many reasons to be disliked by most all Americans.

TROUT 2012
@bellsouth.net

TROUT 2012 to n2jtx

Anon

to n2jtx
you respected 'ma bell' -- "is this the party to whom i am speaking? we're the phone company, we don't have to care." that's the old ma bell. they have been a thieving monopoly for decades, and now they want to re-monopolize the market. 70 congressmen accepted about $500,000 in campaign donations, including my own congressman (got $6K) and then all promptly signed a letter to the fcc endorsing att's monstruous intentions. extra, extra, read all about it. »trout-2012.us

FFH5
Premium Member
join:2002-03-03
Tavistock NJ

FFH5 to fuziwuzi

Premium Member

to fuziwuzi
said by fuziwuzi:

Which would not surprise me was the goal all along. AT&T are some of the slimiest SOBs on the planet. They care nothing for workers or customers, they would slit their mother's throats for a 0.1% bump on the stock market.

Hyperbole alert. The goal of competition is to leave your competitors in worse shape than your own company. And contracts are designed to protect your company as much as possible. TMO had lawyers too and signed the deal.

PapaMidnight
join:2009-01-13
Baltimore, MD

PapaMidnight

Member

Re: ...left a competitor in considerably worse shape

said by FFH5:

said by fuziwuzi:

Which would not surprise me was the goal all along. AT&T are some of the slimiest SOBs on the planet. They care nothing for workers or customers, they would slit their mother's throats for a 0.1% bump on the stock market.

Hyperbole alert. The goal of competition is to leave your competitors in worse shape than your own company. And contracts are designed to protect your company as much as possible. TMO had lawyers too and signed the deal.

This point cannot be argued. T-Mobile / Deutsche Telekom has lawyers as well and still signed the deal knowing full and well what the terms of the agreement are. If anything, they've dug their own grave whether it should go through or not.
fiberguy2
My views are my own.
Premium Member
join:2005-05-20

fiberguy2

Premium Member

Re: ...left a competitor in considerably worse shape

Not really... in this case, TMo wasn't stupid.. it's just the fact that NEITHER side figured that the government was actually going to step in and TRY to stop a deal, for once, that should have never happened.

For all either side cared, and under the ways that mergers/deals HAVE gone over the past decade, they could have written the terms on the back of a cocktail napkin and been just fine. So really, again, the oddity in this whole deal was the fact that someone in DC actually did (or is giving the illusion of) their job for once. They were both just caught off guard.
CXMNYC
join:2011-08-30
New York, NY

CXMNYC to FFH5

Member

to FFH5
Couldn't agree more, T-Mobile has no one but themselves to blame...and the lawyers they hired.

DataRiker
Premium Member
join:2002-05-19
00000

DataRiker to FFH5

Premium Member

to FFH5
said by FFH5:

Hyperbole alert. The goal of competition is to leave your competitors in worse shape than your own company. And contracts are designed to protect your company as much as possible. TMO had lawyers too and signed the deal.

Business used to be about making a good product.

I would rather a company focus on this aspect rather than their competition.
rradina
join:2000-08-08
Chesterfield, MO

rradina

Member

Re: ...left a competitor in considerably worse shape

Business has always been about making money. The fact that they also make a good product is only because market forces positively reward that behavior.

DataRiker
Premium Member
join:2002-05-19
00000

DataRiker

Premium Member

Re: ...left a competitor in considerably worse shape

said by rradina:

Business has always been about making money. The fact that they also make a good product is only because market forces positively reward that behavior.

Agreed.

The former used to be necessary for the latter.

Corporatism changed that.

fuziwuzi
Not born yesterday
Premium Member
join:2005-07-01
Palm Springs, CA

fuziwuzi to FFH5

Premium Member

to FFH5
Strawman alert! But by your signature, you've never met a greedy corporation you didn't like or want to support with corporate welfare from the government.

nahn
@sbcglobal.net

nahn to fuziwuzi

Anon

to fuziwuzi
Don't blame T for DT dumping out of the US market.

beckham2
@cox.net

beckham2 to fuziwuzi

Anon

to fuziwuzi
HearHear!

cdru
Go Colts
MVM
join:2003-05-14
Fort Wayne, IN

cdru

MVM

Lawyers

It's fun to watch the lawyers turn on their own kind within the industry and screw each other over with their legalese and escape clauses. Well, it would be fun if I wasn't a TMo subscriber.
cdru

cdru

MVM

Something doesn't make sense

From the Reuter's article:
quote:
As part of the AT&T deal, Deutsche Telekom had secured a break fee comprising $6 billion in cash and other assets should regulators reject the deal.

But the source said on Monday that AT&T will only have to pay that fee if certain conditions are met.

For instance, the acquisition has to receive regulatory approval within a certain timeframe, the source said. Otherwise, the contract is void.
This doesn't make sense. DT gets the fee if regulators reject the deal, but only if regulators approve the deal? Those seem mutually exclusive of each other. I suppose that AT&T might have actually put that in there just for that reason, and if they did then TMo's should have hired better lawyers.
tcope
Premium Member
join:2003-05-07
Sandy, UT

tcope

Premium Member

Re: Something doesn't make sense

Thank you... it was not just me who thought that made no sense. Me think this article is probably full of errors.

There is no doubt that AT&T will fight the contract if the deal does not go through... it does not matter why it fails. It simply makes financial sense to fight it (typically done as this cost the defendant money and they usually settle for less).

None the less, it's all moot. The deal will go through. It's not like money won't buy you regulation in the US. AT&T has a $7 billon budget to make sure the deal goes through.

coldmoon
Premium Member
join:2002-02-04
Fulton, NY

coldmoon to cdru

Premium Member

to cdru
said by cdru:

From the Reuter's article:

quote:
As part of the AT&T deal, Deutsche Telekom had secured a break fee comprising $6 billion in cash and other assets should regulators reject the deal.

But the source said on Monday that AT&T will only have to pay that fee if certain conditions are met.

For instance, the acquisition has to receive regulatory approval within a certain timeframe, the source said. Otherwise, the contract is void.
This doesn't make sense. DT gets the fee if regulators reject the deal, but only if regulators approve the deal? Those seem mutually exclusive of each other. I suppose that AT&T might have actually put that in there just for that reason, and if they did then TMo's should have hired better lawyers.

My guess here, and it is a guess, is that the deal was about a scenario where the FCC approved, but the DOJ rejected the deal. This is a valid scenario in that the regulatory body is the FCC and it appeared that they were going to actually approve the deal regardless.

With the DOJ playing the anti-trust card BEFORE the FCC made its final ruling however, these conditions are not met and AT&T is off the hook. So from this view, it looks like AT&T thought this could happen so moved to protect themselves with an out that keeps 3+ Billion in their hands. IOWs, if fail by DOJ action, take your football and go home...

cdru
Go Colts
MVM
join:2003-05-14
Fort Wayne, IN

cdru

MVM

Re: Something doesn't make sense

said by coldmoon:

With the DOJ playing the anti-trust card BEFORE the FCC made its final ruling however, these conditions are not met and AT&T is off the hook.

Possibly, however the FCC hasn't ruled yet one way or another. I'm sure the FCC at least takes into consideration the DOJ's objection in whatever decision that they make. Despite what other posters repeat in every news article posted here, there is still a very real chance that the FCC will object to it for the similar reasons as the DOJ. So while the DOJ initially blocked the merger, the FCC may also make it a moot point.

If that is the case, I'll expect to see a news article on AT&T attempting to weasel out of paying because the DOJ objected first (if that indeed would break the deal).

coldmoon
Premium Member
join:2002-02-04
Fulton, NY

coldmoon

Premium Member

Re: Something doesn't make sense

said by cdru:

said by coldmoon:

With the DOJ playing the anti-trust card BEFORE the FCC made its final ruling however, these conditions are not met and AT&T is off the hook.

Possibly, however the FCC hasn't ruled yet one way or another. I'm sure the FCC at least takes into consideration the DOJ's objection in whatever decision that they make. Despite what other posters repeat in every news article posted here, there is still a very real chance that the FCC will object to it for the similar reasons as the DOJ. So while the DOJ initially blocked the merger, the FCC may also make it a moot point.

If that is the case, I'll expect to see a news article on AT&T attempting to weasel out of paying because the DOJ objected first (if that indeed would break the deal).

I think that the potential for the FCC backing the merger at this point is getting more and more unlikely given the backlash that has occurred due to the sloppy work re the document leaks. You will also note that the FCC released a press statement just after the DOJ announcement that essentially towed the DOJ line minus some wiggling room for a potential re-work with concessions should it appear that AT&T might pull this hat out of the rabbit in court.

IOWs, the FCC is not going to make a real move for or against until the end game with the DOJ has a more predictable outcome...
sparc
join:2006-05-06

sparc to cdru

Member

to cdru
It's poor wording in the article.... the original rumors of the deal mentioned the first part of the quote "As part of the AT&T deal, Deutsche Telekom had secured a break fee comprising $6 billion in cash and other assets should regulators reject the deal."

now the anonymous source is saying that this original rumor isn't true and there is a timeframe clause and possibly other conditions where AT&T has an out. When you think about it, it really makes sense that AT&T wouldn't make it that easy for a payout. You knew there had to be a catch.

cdru
Go Colts
MVM
join:2003-05-14
Fort Wayne, IN

cdru

MVM

Re: Something doesn't make sense

said by sparc:

now the anonymous source is saying that this original rumor isn't true and there is a timeframe clause and possibly other conditions where AT&T has an out. When you think about it, it really makes sense that AT&T wouldn't make it that easy for a payout. You knew there had to be a catch.

Someone might want to tell DT that the rumor isn't true then.

»news.cnet.com/8301-1035_ ··· kup-fee/
sparc
join:2006-05-06

sparc

Member

Re: Something doesn't make sense

if you look closely though, DT doesn't really state what exactly is inaccurate.

I trust DT just about as much as i trust AT&T to be telling the whole truth. They are telecom companies. It's in their nature to be misleading.

pnh102
Reptiles Are Cuddly And Pretty
Premium Member
join:2002-05-02
Mount Airy, MD

pnh102

Premium Member

Of Course They Won't Pay

Because the merger will be approved. Just give AT&T enough time to cut the right checks and grease the right palms and all of the objections to this merger will magically disappear.
tmc8080
join:2004-04-24
Brooklyn, NY

1 edit

tmc8080

Member

have an out, use it!

it's unlikely that the DOJ will be reasonable (read: favorable to at&t) when they ask for iron-clad pricing guarantees for non-competitive markets and asset divestiture, so just use your get out of jail free card and exit the deal, before DOJ kills it becuase ending it badly could cause Tmobile to sue.. and that'll be several more millions of dollars down the drain.

* Food for thought.. if the deal exit fee as an excuse or reason for the deal to go through.. with agreed exceptions, one of those is protracted legal & regulatory disputes.. it should not be used as a wedge issue for cedeing for limited or no concessions on at&t's part.

customer
@verizon.net

customer

Anon

The truth will always win

said by pnh102:

Because the merger will be approved. Just give AT&T enough time to cut the right checks and grease the right palms and all of the objections to this merger will magically disappear.

there is no way at&t can beat or try and pay off the truth, which is that they want to eliminate a competitor who is the only other gsm phone offering company in the States, in order to make more money off people. The DOJ said it, in there statement that any way At&t tries to cut it, they are eliminating competition which is bad for customers. You have hundreds of thousands of customers and grass roots groups fighting this deal who understand what's going on with this deal and know the implications of what will happen if its passed. Just check out the organisation known as free press and you will see all that they are doing to stop this bill. I'm sorry but I don't think no amount of money that at&t puts up can kill the truth.

The one thing i don't understand is how is t-mobile losing customers?
talz13
join:2006-03-15
Avon, OH

talz13

Member

Re: The truth will always win

said by customer :

The one thing i don't understand is how is t-mobile losing customers?

T-Mobile customers are seeing the merger on the news, in commercials, and in articles like this. They would rather get out now and move to another service than get absorbed by AT&T.

hambone42
Peace, through superior firepower
Premium Member
join:2002-02-02
Manassas, VA

hambone42

Premium Member

Re: The truth will always win

said by talz13:

said by customer :

The one thing i don't understand is how is t-mobile losing customers?

T-Mobile customers are seeing the merger on the news, in commercials, and in articles like this. They would rather get out now and move to another service than get absorbed by AT&T.

There are also potential TMobile customers, some of whom are undoubtedly looking to leave AT&T, who are now sitting on the sidelines waiting to see what happens.

I moved to Cingular back in the day to get away from the Death Star, only to be sucked right back in...fool me once, and all that...
hottboiinnc4
ME
join:2003-10-15
Cleveland, OH

hottboiinnc4

Member

Re: The truth will always win

moved to Cinuglar to get away from the dealth stare/ LMAO! you do realize that Cingular was ALWAYS a joint venture of SBC and Bell South right?
xrobertcmx
Premium Member
join:2001-06-18
White Plains, MD

xrobertcmx to talz13

Premium Member

to talz13
Or you have people like myself who had been with AT&T wireless when Cingular bought us out and changed the name to AT&T. Service became bad, towers taken down, it was miserable and the only out was to "upgrade" to more expensive Cingular plans. So we went to T-Mobile. Next thing you know T-Mobile is likely to become a part of AT&T and what does that mean? Higher prices, bad service, towers being converted, coverage becoming spotty. And your only out, an "upgrade" to a higher priced AT&T plan. So, you get out now.
T-Mobile lost a lot of customer this past quarter. They have high churn, and it got worse.
openbox9
Premium Member
join:2004-01-26
71144

openbox9 to talz13

Premium Member

to talz13
Wasn't Tmobile losing customers before the announcement of the acquisition?
RDC17
join:2011-05-15
Vienna, VA

RDC17

Member

This is why DT wants the deal to be done so badly

It passes- they're out of the US market and they have $39 billion to pump into their European entities- a huge competitive edge.

It doesn't go through- they're still on the hook for running T-Mobile USA and would either have to pump in cash (which would take away from expansion in Europe) or sell out at a much lower price (if there is even a company out there that is willing to buy).

They've put all their eggs in one basket. Quite honestly the deal falling through would end up being worse for consumers than letting AT&T buy them out (with conditions, of course).

•••
rdmiller
join:2005-09-23
Richmond, VA

rdmiller

Member

Dont Trust Anonymous!

The story from Reuters misstated the facts," Deutsche Telekom representative Andreas Fuchs told CNET today. "The breakup fee was agreed to precisely to deal with the possibility that regulatory approval is not obtained."

David
Premium Member
join:2002-05-30
Granite City, IL

David

Premium Member

My brother in law said this the other night

He reads here anon occasionally..and shakes his head at you guys so much.

I quote this right from him via e-mail, we had been chatting...

As a former sprint customer (yea I know they suck I have seen it first hand with your sister-in-law's account!) what on earth would sprint do with t-mobile anyway? They use different tech for their phones anyway. Another point to consider is what if sprint ruined t-mobile like they did ruin nextel? What then? They are pretty much ruining clear now. T-mobile people would still be screwed. it's not like they have a location here in Granite anymore, that closed shop. Wal-mart resells their service under their brand and only cheapskates are interested in that! They buy just to have a phone, not smart phones. Suppose Sprint shut down T-mobile. What then? Sprint break it apart and sell it? What then? Sprint shuts down Tmobile's network, sells the chunks, and all the Tmobile customers become new sprint customers.

AT&T would still win (and it would be a lot cheaper!) - only because T-mobile owners want out.

Tmobile has one thing going for it.... the girl in the commercials is a hottie, but she's broken and her owners don't want to fix it, they just want to sell her!

I have yet to see someone over there answer this question. Can you force a business to stay in business if they don't want to be here in the US of A? Face it folks, US of A has been an unattractive whore for a long, long time. That hasn't changed. Maybe one day it will. 15 Trillion hasn't done it yet..


customer
@verizon.net

customer

Anon

Re: Re: the truth will always win

said by talz13:

said by customer :

The one thing i don't understand is how is t-mobile losing customers?

T-Mobile customers are seeing the merger on the news, in commercials, and in articles like this. They would rather get out now and move to another service than get absorbed by AT&T.

Yeah but the deal hasn't even been approved so why wouldn't they wait to see if its approved b4 leaving, in terms of pricing, right now tmobile out of the big 4 are the cheapest so I think there customers would stay because that's why they are with tmobile b/c of affordable pricing so instead of leaving and going to an competitor who is going to be more expensive with higher pricing, might as well stay and keep affordable pricing until the deal is approved.

I mean that's what I am doing as I am a tmobile-usa customer and I won't leave until the deal is approved (as i refuse to pay higher charges for same service, by going to verzion, sprint or at&t) for and at this rate the deal will get squashed so I get to keep my affordable pricing with tmobile-usa. I only hope that tmobile parent company after the deals gets squashed puts some money into tmobile-usa by getting LTE and also some more powerful cell towers that give me service in subways underground, if not I am happy with my 3.5G HSPA+, which allows me to talk, instant message, text and surf.

Still think though, that people shouldn't leave until deal is approved and I mean officially approved by FCC & DOJ and not on some stupid at&t commercial saying: "yes at&t is getting or has acquired tmobile-usa," commercials tell half truths and lies, people should always check fine print.
customer

customer

Anon

Re: My brother in law said this the other night

said by David:

He reads here anon occasionally..and shakes his head at you guys so much.

I quote this right from him via e-mail, we had been chatting...

As a former sprint customer (yea I know they suck I have seen it first hand with your sister-in-law's account!) what on earth would sprint do with t-mobile anyway? They use different tech for their phones anyway. Another point to consider is what if sprint ruined t-mobile like they did ruin nextel? What then? They are pretty much ruining clear now. T-mobile people would still be screwed. it's not like they have a location here in Granite anymore, that closed shop. Wal-mart resells their service under their brand and only cheapskates are interested in that! They buy just to have a phone, not smart phones. Suppose Sprint shut down T-mobile. What then? Sprint break it apart and sell it? What then? Sprint shuts down Tmobile's network, sells the chunks, and all the Tmobile customers become new sprint customers.

AT&T would still win (and it would be a lot cheaper!) - only because T-mobile owners want out.

Tmobile has one thing going for it.... the girl in the commercials is a hottie, but she's broken and her owners don't want to fix it, they just want to sell her!

I have yet to see someone over there answer this question. Can you force a business to stay in business if they don't want to be here in the US of A? Face it folks, US of A has been an unattractive whore for a long, long time. That hasn't changed. Maybe one day it will. 15 Trillion hasn't done it yet..

Your bro has a good point you can't force a business who wants to lock up shop to stay opened. This might also go to show people who live in the States like me that, investors and foreign companies might not be looking at USA as some place they would want to open a business or invest in and tmobile parent company, might be logically thinking, get out of USA b/c of economic issues. Which your bro points out also. I mean tmobile parent company has a great point in saying they don't want to have a company in a country that might default, i mean even some of the richest 1 % of the USA economy and I am talking about the billionaires of the billionaires are leaving the USA. Check out Jim Rogers who is an stock investing genius, has left USA and moved to wear, you guessed it Singapore in Asia. Dude even has his wife and kid there and has his daughter learning Chinese, because he wants her to be prepared for the future who in his eyes sees the economic super power as the Asian market. Maybe tmobile parent company might be trying the same thing.

Oh_No
Trogglus normalus
join:2011-05-21
Chicago, IL

Oh_No

Member

Tmobile's Value?

Is that stock value which has nothing to do with the company or is it the actual company value?

It would make no sense to use stock value as a condition of a contract as that can change for any reason at any time.
axiomatic
join:2006-08-23
Tomball, TX

axiomatic

Member

Paid off people are paid off.

I didn't really expect AT&T to pay the failure clause anyway.

Paid off people are paid off. Don't feel bad for poor AT&T. They are integral to the US government for wiretap and national security reasons. The US government will step in if anything hampers their ability to spy on the nation for good or bad reasons.
wahoospa
join:2006-03-23
Charleston, SC

wahoospa

Member

Deutsche Telekom: We are entitled to a Breakup Fee.

News.com is running a article that says that Reuters was wrong in their article and Deutsche Telekom is entitled to a breakup fee.
sides14
join:2007-11-29
Peoria, AZ

sides14

Member

Re: Deutsche Telekom: We are entitled to a Breakup Fee.

No company would enter into an open ended contract knowing that they had to divest significant assets to gain approval.

»www.bloomberg.com/news/2 ··· pid=yhoo

cork1958
Cork
Premium Member
join:2000-02-26

cork1958 to wahoospa

Premium Member

to wahoospa
said by wahoospa:

News.com is running a article that says that Reuters was wrong in their article and Deutsche Telekom is entitled to a breakup fee.

I saw that article also and I think T-Mobile should get the fee, regardless, meaning even if the merger DOES go through!

AT&T sucks green donkey d**k and should be broken up again!!