AT&T Announces $6 Billion Breakup Fee on T-Mobile Proposed Deal

By Ed Silverstein May 13, 2011

The Neil Sedaka song goes “Breaking up is hard to do.” But it appears AT&T is hoping it will never have to sing those lyrics.

The company has announced that its proposed deal to acquire T-Mobile USA has a break-up fee of $6 billion, according to a report from Investor’s Business Daily.

“The steep fee suggests AT&T is confident it can win regulatory approval,” explains Investor’s Business Daily.

The fee is required if the proposed $39 billion acquisition of T-Mobile USA doesn't go through, the newspaper reports.

If that’s the case, then AT&T would have to pay T-Mobile’s parent company Deutsche Telekom: $3 billion in cash; $2 billion worth of spectrum; and a roaming agreement totaling $1 billion, Reuters is reporting.

The breakup fee represents 15.4 percent of the buyout price, which Investor’s Business Daily classifies as a “global record high.”

According to a recent report carried on TechZone360, T-Mobile USA reported service revenues of $4.63 billion during the first quarter of 2011. The number of customers using smartphones during the quarter increased, too.

Net customer losses were 99,000 in the first quarter of 2011 compared to 77,000 net customer losses in the first quarter of 2010, the company said in a statement.

“We continue to drive our strategy and lay the foundation for improved future performance and have seen some positive trends in the quarter as evidenced through data ARPU [average revenue per user] growth rates,” Philipp Humm, president and CEO of T-Mobile USA, said in the company statement carried by TechZone360. “The success in our data business has been driven by our 4G network message, our compelling 4G device offerings and our attractive data plans; however, we still have challenges facing our business as evidenced by high contract churn and contract customer losses in the first quarter of 2011.”

“The first quarter shows a mixed picture with positive trends in the development of data ARPU. Our deal with AT&T announced a few weeks ago will not change the focus of our US business. Until the closing of the deal, T-Mobile will continue to challenge its competitors and compete aggressively in the US market,” René Obermann, CEO of Deutsche Telekom, added in the statement.

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Ed Silverstein is a TechZone360 contributor. To read more of his articles, please visit his columnist page.

Edited by Jennifer Russell

TechZone360 Contributor

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