AT&T's deal to buy T-Mobile USA could end up being even costlier than originally thought.
The Wall Street Journal reported yesterday that the telecommunications giant has hired bankers to advise it on the potential sale of customers and spectrum--assets that may be worth $8 billion or more.
It's no huge surprise that AT&T will need to make concessions. AT&T CEO Randall Stephenson has said as much. But this is the first time there has been a value placed on the trade-offs it will have to make to get the deal done.
The concessions, which come in the form of divested markets and customers, as well as spectrum, would mark a steep price needed to get government approval of the deal. The merger combines the second- and fourth-largest wireless carriers in the nation, creating a giant player that critics say will control too much power in the industry.
AT&T, meanwhile, wouldn't comment on any specific details regarding possible concessions.
"As we said on the day we announced the merger with T-Mobile USA, we anticipate there will be some divestitures, as we have had in past mergers, but any speculation about the amount of divestitures is premature," said a company representative.
The potential trade-off sale could be a boon for other carriers such as Verizon Wireless, or foreven smaller regional players such as MetroPCS and Leap Wireless. All of the companies are eager to scoop up spectrum, while the prepaid providers could pick up additional markets.
The hiring of Bank of America as an adviser suggests AT&T has some level of confidence that the deal will be approved. WSJ reported that the bank hasn't yet started the formal sales process and won't do so until the deal is further along in the approval process.
Much of the assets sold would come from the T-Mobile side, WSJ reported, although AT&T may choose to divest some of its own markets.
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The concessions would come on top of the $39 billion AT&T plans to pay to acquire T-Mobile from Deutsche Telekom. The deal was announced in March, and the companies still expect to close it by the first quarter of next year. But with the intense scrutiny and opposition it faces, the deal isn't guaranteed to be approved.
The deal has won praise from technology companies in Silicon Valley to governors and state officials. But it has also drawn criticism from consumer groups, carriers such as Sprint Nextel and MetroPCS, and key U.S. senators.
Updated at 8:37 a.m. PT: with a response from AT&T.