Telekom braces for AT&T deal collapse

Telekom braces for AT&T deal collapse
Photo: DPA
US and German telecommunications giants AT&T and Deutsche Telekom said on Thursday they are preparing for the potential collapse of their $39-billion (€29-billion) deal for T-Mobile USA.

The deal, which would result in AT&T buying T-Mobile, the US unit of Deutsche Telekom, has run into regulatory trouble in the United States.

“AT&T has announced it expects to recognise a pre-tax accounting charge to reflect the potential break up fees due to Deutsche Telekom in the event that the transaction does not receive regulatory approval,” the German company said

in a statement.

Dow Jones Newswires reported that the charge would amount to $4.0 billion in this year’s last quarter in an acknowledgement that the deal faces an increasingly uphill battle.

The companies nevertheless insisted they “are continuing to pursue the sale” despite opposition voiced on Tuesday by the US Federal Communications Commission (FCC), following objections already raised by the Justice Department.

The Justice Department filed a lawsuit to block the deal 31 August, saying it would harm competition. The case is scheduled to go to trial in Washington 13 February.

FCC chairman Julius Genachowski had asked the other four commissioners on the body for AT&T’s acquisition of T-Mobile to be subject to a hearing before an administrative law judge.

As a result, Deutsche Telekom said in the statement that it and AT&T had withdrawn the pending applications with the FCC and would focus their efforts on winning the approval of the Justice Department.

If successful, they would turn back to the FCC for approval.

AT&T, T-Mobile, Sprint Nextel and Verizon Wireless provide more than 90 percent of the mobile wireless connections in the United States.

Verizon currently holds a 31-percent share of the US wireless subscriber market followed by AT&T with 27 percent, Sprint Nextel with 14 percent and T-Mobile with nine percent.

Moody’s ratings agency has already indicated that a collapse of the sale could force Deutsche Telekom, which needs to cede the tiny struggling unit, to abandon the highly competitive US market.


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