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Analysts Are Down On AT&T, T-Mobile Merger Prospects

9/08/2011 12:01:00 AM Eastern
NEW YORK — The prospects for AT&T’s proposed acquisition of T-Mobile have dimmed considerably in the wake of the Justice Department’s suit to block the merger and reservations expressed by Federal Communications Commission (FCC) chairman Julius Genachowski.

But AT&T could still prevail in the expedited court hearing that it will request or reach an outof- court agreement with the Justice Department to salvage part of the deal, they said.

Whatever happens, T-Mobile parent Deutsche Telekom could be the big winner, independent analyst Jeff Kagan said. If the deal doesn’t go through, he pointed out, “AT&T has to pay TMobile $3 billion in cash and $2 billion in spectrum,” he said of the deal’s break-up provisions. “That would let T-Mobile grow into a healthier competitor.”

To salvage all or part of the deal, IDC said it believes AT&T will have to consider “a multitude of concessions” to “further its discussions” with the Justice Department and FCC. They would include selling off spectrum in markets where the combined companies would have “too much market power,” the company said.

Selling off spectrum, however, could prove to be a hard sell to the court and to the government agencies, IDC noted. Selling spectrum on a market-by-market basis “is an easier proposition when dealing with a more competitive landscape — such as going from six players down to five,” IDC said. The research company also noted that the Justice Department “does not pay any heed to the influence of MetroPCS and Leap, which at this point, are arguably quasi-national competitors.”

Said Kagan, “Never say its over. It depends how badly AT&T wants this spectrum and what they are willing to do next. And they really want this spectrum.”
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