In an effort to salvage its proposed $39-billion takeover of T-Mobile USA in the face of regulatory opposition, AT&T (NYSE:T) is considering an offer to divest a rather large portion of assets than it initially proposed, according to a report in Bloomberg, which cited a person familiar with the situation.
According to Bloomberg's source, AT&T could propose to divest as much as 40 percent of T-Mobile's assets. AT&T is attempting to placate the concerns of the Justice Department, which sued to block the acquisition in August. AT&T was dealt another blow last week when FCC signaled it would block the deal.
Subsequently, AT&T withdrew its merger application at the FCC in order to focus its efforts on obtaining antitrust approval for the deal. AT&T also announced it will take a pretax accounting charge of $4 billion ($3 billion in cash and $1 billion in spectrum) in the fourth quarter "to reflect the potential break-up fees due Deutsche Telekom in the event the transaction does not receive regulatory approval."
AT&T and T-Mobile parent Deutsche Telekom said they plan to re-file their merger proposal with the FCC after obtaining approval from the Department of Justice. Hence, the reason AT&T may be willing make drastic divestitures.
"It's going to be problematic for AT&T to find a successful divestiture solution," Kevin Smithen, an analyst with Macquarie Securities USA, told Bloomberg. The pool of potential buyers isn't very big and those that might be interested probably wouldn't have a chance, Smithen said. "It's unlikely that the DOJ would allow a big competitor like Verizon to purchase the assets," Smithen said.
According to the publication's source, AT&T's proposal could include a divestiture of a larger share of customers and lower percentage of spectrum.
The DOJ court case is expected to begin Feb. 13.
- see this Bloomberg article
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