Sources: If T-Mobile’s value drops, so could AT&T merger’s “break fee”
Deutsche Telekom AG, T-Mobile’s parent company that is trying to sell the US division to AT&T, could miss out on the substantial fee they stand to collect if the merger is not approved, sources tell Reuters.
The German telecommunications giant negotiated a $6B “break fee”—comprised of cash and other assets—that they would collect if regulators were to reject the proposed merger.
But Reuters’ anonymous sources say that for that to happen, T-Mobile’s value has to remain above a certain (unspecified) level, something that could be jeopardized if regulators stipulate that parts of T-Mobile be sold in order for the merger to be approved. But if regulatory approval isn’t obtained by certain (again, unspecified) date, the merger will be voided.
The “break fee,” which includes $3B in cash, represents about 15 percent of the $39B deal’s total value. It was likely a crucial part of negotiations for Deutsche Telekom, because if the merger collapses they are left with a dwindling smartphone subscriber base and insufficient wireless spectrum to build out their own 4G network.
News about the $6B payout has ramped up in the wake of news of the US Justice Department’s recent lawsuit attempting to break up the merger. If they are successful, T-Mobile stands to receive the $3B balance of the fee in services, assets and a roaming agreement.