ATandT Could Skip Fee in T-Mobile Merger Failure

A Reuters report says AT&T might get out of a $6 billion break-up fee if its acquisition of T-Mobile is squashed.

Network operator AT&T, currently in the midst of a high-stakes legal battle with the U.S. government over its proposed takeover of Deutsche Telekom's American arm, T-Mobile USA, might not have to pay the $6 billion break-up fee it would have been faced with if the deal does no gone through, Reuters reported. "There are a number of options under which the contract will not come into effect," an unnamed source was quoted by the news service as saying.

"Under its agreement with Deutsche Telekom, the deal is only valid if the acquisition receives regulatory approval within a certain timeframe, the source said on Monday," Reuters reported. "Also, the agreement could become invalid if regulatory conditions for the sale push the value of T-Mobile USA below a certain level, the person said."

The U.S. Department of Justice filed an antitrust lawsuit Aug. 31 seeking to prevent the proposed merger of AT&T and T-Mobile, a $39 billion deal. The DOJ argues the merger would reduce competition for mobile wireless communications services across the United States, according to a statement provided by the Justice Department.

The DOJ statement added that the merger would result in higher prices, poorer quality services, fewer choices and less product innovation. The Justice Department filed the lawsuit in the U.S. District Court for the District of Columbia-the same court that oversaw the original breakup of AT&T.

In addition, the Federal Communications Commission in August dealt a blow to AT&T by tying together the company's proposed acquisition with a $1.9 billion deal that would see AT&T acquire some of Qualcomm's spectrum licenses. The agency's ongoing review has confirmed that the proposed transactions raise a number of related issues, including, but not limited to, questions regarding AT&T's aggregation of spectrum throughout the nation, particularly in overlapping areas.

Consumer Watchdog applauded the DOJ for filing the antitrust complaint to block the merger, calling it a victory for cell phone consumers, and urged the FCC to reject the deal as well. Earlier this month, Consumer Watchdog wrote a letter to the DOJ, the FCC and the California Public Utilities Commission, pointing out that the very same promises of better services and cheaper prices that AT&T makes today it also made back in 2004, when it sought permission to merge with Cingular, only to betray those promises after federal officials approved the deal.

Consumer Watchdog's lawyers subsequently brought a nationwide class action lawsuit against AT&T in 2006 seeking refunds for AT&T's customers. AT&T continues to fight that lawsuit, claiming that its customers are barred from suing AT&T in courts and must take their dispute to arbitration panels paid for by AT&T.

"The last thing beleaguered American consumers need right now is higher prices and shoddier cell phone service. That's exactly what would happen if AT&T were permitted to buy T-Mobile. The FCC should join DOJ in opposing this anti-competitive proposal," said Harvey Rosenfield, founder of Consumer Watchdog and one of the lawyers in the 2006 lawsuit against AT&T.