Financial analysts are becoming pessimistic that AT&T (NYSE:T) will win approval for its proposed $39 billion acquisition of T-Mobile USA. The analysts argue that to improve the deal's prospects, AT&T will have to make significant concessions ahead of a February trial with the Department of Justice, which is suing to block the deal on antirust grounds.
According to the Financial Times, most analysts now rate the deal's chances as less than 50/50, with some even giving it only a 20 percent chance of approval. Bankers note that for the deal win approval, AT&T might have to sell significant spectrum--likely AWS airwaves--to a smaller player like MetroPCS (NASDAQ:PCS).
AT&T and T-Mobile parent Deutsche Telekom continue to insist that the deal will eventually be approved by regulators. "Over the past two years, T-Mobile USA has been losing customers despite explosive demand for mobile broadband," AT&T said in a statement, according to the FT. "T-Mobile USA has no clear path to 4G LTE, the industry's next generation network, and its German parent, Deutsche Telekom, has said it would not continue to make significant investments in the United States."
However, Deutsche Telekom is bound by its contract terms with AT&T to neither pursue a "Plan B" for the deal nor seek another suitor. "This enforced silence and legal limbo is a very long way from a comfortable position for Deutsche Telekom, as it remains the reluctant owner of an asset that is deteriorating rapidly in an increasingly difficult US [market]," Sanford C. Bernstein analysts Robin Bienenstock and Craig Moffett wrote in a recent research note.
Earlier this month AT&T noted in a regulatory filing that it had pushed back the expected closing of the deal to sometime in the first half of 2012, later than the expected closing of March. A trial with the Department of Justice is expected to begin Feb. 13, and the two sides have started the process of naming witnesses for the trial.
Further, U.S. District Judge Ellen Huvelle ruled earlier this month that Sprint Nextel (NYSE:S) and C Spire Wireless could continue parts of their lawsuit to block the AT&T/T-Mobile deal. While Huvelle threw out many of the claims Sprint and C Spire, formerly Cellular South, made in their filings, she ruled that the two could continue to pursue claims that the deal will harm the mobile device marketplace.
- see this Financial Times article
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