Report: AT&T could divest up to 25% of T-Mobile to win approval for deal

AT&T (NYSE:T) may have to divest up to 25 percent of T-Mobile USA's spectrum and customers to make AT&T's proposed $39 billion acquisition of T-Mobile palatable to the Department of Justice, which sued this week to block the deal, according to a Reuters report.

The report, which cited unnamed sources, said that AT&T will simultaneously fight the Justice Department's suit in court and seek to make concessions to win regulatory approval. Bloomberg also reported that AT&T is prepared to make concessions, and Sharis Pozen, the acting chief of the justice department's antitrust division, has indicated that the government might be open to hearing what concessions AT&T would offer.

An AT&T spokesman declined to comment beyond the statement the company issued Wednesday, in which it said it remains "confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court."

In August, the Wall Street Journal reported that AT&T hired Bank of America Merrill Lynch to advise it on up to $8 billion worth of asset sales, which included spectrum and customers. T-Mobile served 33.6 million customers at the end of the second quarter.

Even if AT&T managed to prevail against the Justice Department, the deal must also be approved by the FCC, which has indicated its uneasiness with the acquisition. The FCC is still conducting its review, but after the Justice Department filed its lawsuit, FCC Chairman Julius Genachowski released a statement in which he said that there are "serious concerns about the impact of the proposed transaction on competition."

"It's a DOJ decision, but there was a lot of input from Genachowski's team," an unnamed FCC official told the Journal.

Meanwhile, Sprint Nextel (NYSE:S) CEO Dan Hesse, who has probably been the most visible individual critic of the deal, told a local audience in Kansas City that the deal is not dead yet. However, he praised the Justice Department's lawsuit. "The Department of Justice stated yesterday what we've been saying all along, and that is that AT&T could obtain substantially the same network enhancements that it claims will come from this transaction by simply investing in its own network," he told reporters Thursday, according to the Kansas City Business Journal.

Interestingly, Hesse said Sprint remains open to a merger in the future with a competitive wireless carrier if it made sense for the company.

For more:
- see this Reuters article
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Kansas City Business Journal article

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