AT&T Joined by Deutsche Telekom in Defending T-Mobile USA Deal
August 31, 2011, 3:47 PM EDTBy Ville Heiskanen and Cornelius Rahn
(For more on the AT&T/T-Mobile deal, {EXT6 <GO>}.)
Aug. 31 (Bloomberg) -- AT&T Inc. and Deutsche Telekom AG said they plan to contest the U.S. government’s effort to block their $39 billion deal over T-Mobile USA Inc.
“We are surprised and disappointed by today’s action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated,” Wayne Watts, Dallas-based AT&T’s general counsel, said in a statement. “The DOJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court.”
In a complaint filed today, the U.S. said the deal would “substantially lessen competition” in the wireless market. AT&T’s purchase of Bellevue, Washington-based T-Mobile USA from Deutsche Telekom would combine the second- and fourth-largest U.S. carriers to create a new market leader ahead of No. 1 Verizon Wireless. The new company would have dwarfed current No. 3 carrier Sprint Nextel Corp., which argued against the deal.
AT&T said it plans to ask for an expedited hearing so the deal’s benefits can be fully reviewed. The takeover, announced in March, would help reduce a wireless-spectrum crunch, result in billions of dollars in investment and tens of thousands of jobs, AT&T said.
Deutsche Telekom said it is “very disappointed by the DOJ’s action, and will join AT&T in defending the contemplated merger against the complaint in court.”
5,000 Jobs
Should regulators reject the transaction, AT&T would pay Bonn-based Deutsche Telekom $3 billion in cash. It would also provide T-Mobile USA with wireless spectrum in some regions and reduced charges for calls into AT&T’s network, for a total package valued at as much as $7 billion, Deutsche Telekom said this month.
AT&T may still be able to close the merger, either by fighting the Justice Department in court or by negotiating with regulators. “Our door is open” if AT&T wants to address the agency’s concerns about the deal, Sharis Pozen, acting chief of the Justice Department’s antitrust division, told reporters at a news conference.
AT&T had prepared to make concessions, including asset sales, to win approval for the deal. Michael Nelson, an analyst at Mizuho Securities USA, estimated that AT&T would have to divest 30 percent to 40 percent of T-Mobile USA’s spectrum and subscribers nationwide.
‘Significant Remedies’
“The probability for a successful deal has dropped because they’ve made clear that AT&T needs to come up with significant remedies,” said Heike Pauls, an analyst at Commerzbank AG in Frankfurt who has a “buy” rating on Deutsche Telekom. “Whether they’re within the tolerance zone has to be seen. The process will in any case be longer than was thought.”
Earlier today, AT&T pledged to bring 5,000 call-center jobs back to the U.S. from other countries once the deal closes. The company also said that it wouldn’t cut any U.S. wireless call- center jobs as a result of the purchase.
“We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court,” the company said.
--Editors: Romaine Bostick, Kenneth Wong
To contact the reporter on this story: Ville Heiskanen in New York at vheiskanen@bloomberg.net; Cornelius Rahn in Frankfurt at crahn2@bloomberg.net
To contact the editor responsible for this story: Ville Heiskanen at vheiskanen@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net
