If AT&T's acquisition of T-Mobile USA is rejected by federal regulators, the former will need to pay a hefty sum to Deutsche Telekom for all the trouble, according to Reuters.
Citing anonymous sources, the news service reported yesterday that AT&T would need to pay $6 billion, including $3 billion in cash, to T-Mobile USA's parent company if the deal falls through. That figure would also reportedly include giving Deutsche Telekom $2 billion in spectrum and $1 billion in a "roaming agreement," Reuters says.
Though Reuters' sources didn't give details on the spectrum deal, the news service spoke with an analyst who believes it could have something to do with T-Mobile USA's Long Term Evolution plans. Based on past deals, the analyst said, AT&T might give up 10Mhz of spectrum to T-Mobile USA, potentially paving the way for the company to increase data speeds across its network.
AT&T announced in March its plan to acquire T-Mobile USA from Deutsche Telekom in a deal valued at $39 billion. Deutsche Telekom would receive an 8 percent equity stake in AT&T and get one seat on the carrier's board of directors. The companies hope to close the deal by early next year.
However, as AT&T discovered earlier this week, it has a long road ahead of it to get to that day.
AT&T CEO Randall Stephenson sat before a U.S. Senate subcommittee on antitrust this week to defend his position that the acquisition does nothing to stifle competition.
"The combination of AT&T and T-Mobile could not possibly derail the powerful forces of competition in one of the nation's most competitive industries," he said.
But few were on his side. Sen. Herb Kohl, D-Wisc., said the deal could create a "duopoly" in the wireless industry. Sprint CEO Daniel Hesse said the deal would lead to "irreparable harm to competition." And Sen. Al Franken, D-Minn., said the merger would lead to serious issues on Main Street.
"I believe it's going to raise prices for American families and cost thousands of jobs," he said.
Luckily for AT&T, the Senate doesn't approve or reject the deal--that's the charge of the Justice Department and Federal Communications Commission. However, Bloomberg reported last week that the Justice Department requested more information from AT&T and T-Mobile competitors to adequately determine the impact the merger could have on the industry. The move is further proof that the government plans to take a hard look at the deal and could scuttle AT&T's hopes of getting through the approval process in the next 12 months.
If the deal between the carriers is approved, it would create a giant in the U.S. wireless business: the combined entity would have about 130 million subscribers.