What Happens To T-Mobile If The AT&T Deal Fizzles Out?

Yesterday’s sudden and somewhat shocking revelation that the Department of Justice was suing to block the AT&T/T-Mobile merger caught the world by storm. Now that the dust (and shock) of the news has settled, the question now being asked is…what is next for Deutsche Telekom and specifically their USA brand? An early morning article out of Bloomberg asks this very question and the answer isn’t a simple one.

When AT&T agreed to buy out T-Mobile for $39 billion this past March it was done at 28.8 times profit for DT, giving T-Mobile USA the highest valuation of any wireless carrier outside of China. If the same deal were put together today (at the same multiple AT&T was willing to pay in March) the deal would be for $12 billion less given T-Mobile USA’s current profit slump.

“They’ve got a problem on their hands with T-Mobile,” Brian Barish, Denver-based president of Cambiar Investors LLC, which oversees about $8 billion, said in a telephone interview. Deutsche Telekom isn’t “going to get as much money as they were hoping. It’s basically damaged goods, T-Mobile. They are going to have to figure out a plan B strategy that is mindful of that unavoidable reality,” he said.

While Deutsche Telekom declined a comment to Bloomberg regarding how much T-Mobile USA would be worth to another buyer other than AT&T, the fact remains that nobody will ever offer the same dollar amount. AT&T, DT and other organizations that support the T-Mobile deal plan to fight the DOJ lawsuit but pushing the deal ahead is now more difficult today than it was this same time yesterday. AT&T could still push the deal through albeit with significant divestments and conditions for coverage buildout and job creation, they stand to lose almost $6 billion in cash and spectrum if they fail to close the deal.

The sudden news of the DOJ announcement offered plenty of speculation that a Sprint deal could be a real possibility should the AT&T offer fall apart. Often thought to be the real white knight for T-Mobile USA before the AT&T offer, the DOJ announcement doesn’t seem like they would accept Sprint either as a likely suitor. One of the more popular interpretations of the DOJ lawsuit is that they don’t want any of the large wireless carriers banding together, especially T-Mobile.

“A plain reading of the DOJ’s complaint makes it clear that a Sprint/T-Mobile pairing would be equally unacceptable,” Craig Moffett, New-York-based analyst wrote. “T-Mobile USA may well be forced to remain independent. The prospects of any other deal, including one with Sprint, are also very poor.”

So Deutsche Telekom maybe be forced to think about whether or not they wish to roll up their sleeves pending the end to the AT&T talks and make a serious commitment to the US market or they have to find a more suitable buyer and accept a lower asking price. So who are suitable buyers? Sascha Segan from PCMag attempted to answer that yesterday:

  • Google: Few people see this happening as their Android business relies on it not competing with its own customers and given its recent purchase of Motorola, AT&T and Verizon might be very unhappy should Google push to grab T-Mobile.
  • Cable Companies (Comcast, Time-Warner, Cox, Centurylink, Dish…): Cable companies have long said they want to make headroom in the wireless marketplace. Dish may be a suitable buyer with $3 billion in broadband spectrum already under its belt. Dish could have a nationwide wireless network at their fingertips and could combine their existing spectrum with T-Mobile’s to create a 4G network.
  • Investors: The VC crowd might take a gamble on a T-Mobile USA purchase if they have a solid plan to end up with a significant profit. T-Mobile USA’s profit has declined but wireless is still a profitable business and there may be plenty of investor-executive types who think they can run Tmo USA better than what Deutsche Telekom has done.

A number of other possible names and business floating around such as America Movil, Wind Telecom, Apple and of course Sprint remains at the top of any list. It’s tough to say who are the real possibles given the size of the investment needed to not only purchase T-Mobile, but also to purchase additional spectrum in order to continue growing the network.

The fact of the matter is that this deal isn’t dead and while yesterday was a victory, the war isn’t over yet and this deal still has a long way to go before it’s completely dead. Something tells us AT&T is just getting started with their fight to win over the government and we certainly expect them to throw plenty of money around to help make a victory happen.

Bloomberg; PCMag

 

Tags: , , , , , , , , ,

  • Disgusted

    After all is said and done att will have to spend close to 10B in lawyer, congressman and DOJ fees. The price of a monopoly is not cheap.

    • Marc89

      ATT is one of the riches companies in the World.  And yeah, they have a lot of sprectrum they aren’t using.  They can also built out LTE pretty quick with half the money they are paying for Tmobile.  They are just killing competition.  The iphone 5 will support tmobile AWS 3g…this is not good for AT&T is all carriers get the new iphone.

      They are just trying to kill competition.  It’s a wealthy, greedy company.

  • Anonymous

    At&T ALWAYS wanted an exorbitant deposits(At first $1,000 then $750). Verizon was second at $600. Sprint 3rd $150. T-Mobile? 10 lines, $0 deposit. When T-Mo is eaten alive by AT&T what’s gonna happen to people like me? I currently have Sprint voice plans and a T-Mobile broadband plan. People won’t be able to sign up for AT&T-Mobile with huge deposits like that. If I had $750, I would deposit it in my own bank to earn interest.

    • Marc89

      This deal won’t happen.  DOJ spelled it out clearer than they ever have in a document/suit filed.  Their lawsuit(case) is iron clad.

      AT&T is gunna have to buy off half the senators and judges (which they will try to do) to make it go through and then still sell be required to sell off half of Tmobiles assets if they REALLY, REALLY wants this to happen but IT WON”T.
       

    • Fray Contreras

      Umm…. Thats easy to explain… Your credit sucks. Fix your credit. Plus these are the reasons why companies like ATT and Verizon is on top of their game. They get good paying customers and I dont blame them for that. What T-Mobile has to do for them to be in a good shape is to raise their prices, not too much but raise it so they can make enough money to pay their expenses. You still gonna have your good customer service.

    • Fray Contreras

      Umm…. Thats easy to explain… Your credit sucks. Fix your credit. Plus these are the reasons why companies like ATT and Verizon is on top of their game. They get good paying customers and I dont blame them for that. What T-Mobile has to do for them to be in a good shape is to raise their prices, not too much but raise it so they can make enough money to pay their expenses. You still gonna have your good customer service.

  • Anonymous

    Dan Hesse is our Luke Skywalker.

  • Hothotlees

    why doesnt the executives at tmobile usa just take over the company and run it them selves? any thoughts on this

    • Ryna990

      You need a huge influx of cash to build out LTE.  DK has it but they say they are refusing now because they want the ATT deal to go through.  They (the germans make money by selling to ATT).

      • Getmore Life

        You got it.  Do not believe the evil AT&T and DT liars!

      • Getmore Life

        You got it.  Do not believe the evil AT&T and DT liars!

    • Anonymous

      That’s referred to as a leveraged buyout. The history of leveraged buyouts in America isn’t exactly a stellar one. The M&A bankers got very rich, and the shareholders cashed out, but many true blue American companies no longer exist due to LBO’s. (Of course, to be fair, there are also many cases where LBO’s made sense and the companies in question are still around, and still successful today.)

      Generally though, the company in question ends up saddled with enormous debts that are difficult to repay. 

      If you want an in depth, blow by blow account of an LBO, read Barbarians at the Gate written by Brian Burrough and John Helyar. It’s a fascinating read about one of the more notable business deals of the 80′s (the acquisition of RJR Nabisco by KKR) and trust me, it’s a page turner. 

    • Dewey Cox

      HUH?????

      Those idiots helped put us here in the first place.

      Let’s go get Dotson to see if he can run it. I wonder if he still thinks that there is no future in data services and maybe he will take a chance on that iPhone thingy.

  • Marc89

    Don’t forget the Billionaire owner of Telcel in Mexico who has showed alot of interest in Tmobile.

    • IT Guy

      Where has he shown this interest? Aside from people on these boards saying he wants to, I’ve seen no other indication of it.

      Neither a lexis-nexis search or Google show any articles where he’s said he wants to.

      I hear a lot of chatter on these boards about will buy T-Mobile, and then it gets repeated as fact.

      We need to look at what offers have actually been made. DT has been trying to peddle T-Mobile since 2009, and the only serious offers that have been made were from Sprint and AT&T. None of these other claimed suitors had any interest then, so I fail to see why the would now, as T-Mobile’s standing continues to slide.

      • GetmoreLife

        Please send a link to your “fact” information for a Sprint offer….  This is a forum where people express opinions.  Try to keep that in mind.  Most people have the opinion that AT&T should not buy T-Mobile for very good reasons.  If you need facts on that try the Department of Justice filing.  While their position opposing this buy out is not settled it is alot closer to fact than some AT&T pimps would like to acknowledge.  Time will tell and my opinion is that AT&T deserves nothing more than to be stomped on by the DOJ, the marketplace, God, and anyone else with big boots.  If you do not like that opinion well too bad.  Do not believe the evil AT&T liars!

        • IT Guy

          online. wsj. com /article/SB10001424052748704758904576188460213670064.html

          (Sorry, can’t paste a link directly)

          I am no fan of AT&T. I probably dislike them as much as you do, but I’m trying to be objective. The way I see it, there are only so many options, and none of them are very good.

        • Ericd

            All true about AT&T, I had my bags packed to bolt if the merger happened.  It would be really nice if one of the good guys bought TMO.

        • Ericd

            All true about AT&T, I had my bags packed to bolt if the merger happened.  It would be really nice if one of the good guys bought TMO.

        • Ericd

            All true about AT&T, I had my bags packed to bolt if the merger happened.  It would be really nice if one of the good guys bought TMO.

  • Silk7412

    attention walmart shoppers t mobile is now for sale. Ha ha ha

    • http://pulse.yahoo.com/_TMJPXWZ43W5BFC4MHGWBBFWUCQ Dan B

      could be worse. They can sell t-mobile service during the blue light special at kmart.

    • http://pulse.yahoo.com/_TMJPXWZ43W5BFC4MHGWBBFWUCQ Dan B

      could be worse. They can sell t-mobile service during the blue light special at kmart.

  • Nuts!

    Source Wikipedia:

    “As of June 2008, the German government still holds a 15% stake in
    company stock directly, and another 17% through the government bank KfW.”

    Semantics. Obviously we see things differently about representation versus ownership.

    Regardless, AT&T and DT don’t have a chance in h___ winning in court against the DOJ. Look at the history of DOJ decisions.

    Another buyer will emerge. T-Mobile will get cash, spectrum, and most importantly, favorable data roaming rates from the breakup clause. T is looking better all the time and potential suitors will jump in once AT&T/DT come to their senses and admit defeat.

  • Dewey Cox

    Ya know..Walmart might not be a bad option. They have the money. They already sell the service and the pricing would be good. 
    Their customer base is similar to ours. Worth mentioning.
    What about Cox Cable? They are getting into the cell phone business.

  • Dewey Cox

    Ya know..Walmart might not be a bad option. They have the money. They already sell the service and the pricing would be good. 
    Their customer base is similar to ours. Worth mentioning.
    What about Cox Cable? They are getting into the cell phone business.

    • http://pulse.yahoo.com/_TMJPXWZ43W5BFC4MHGWBBFWUCQ Dan B

      Oh God! No.. don’t put me in the same group as walmart shoppers! haha..

    • http://pulse.yahoo.com/_TMJPXWZ43W5BFC4MHGWBBFWUCQ Dan B

      Oh God! No.. don’t put me in the same group as walmart shoppers! haha..

  • Dewey Cox

    Ya know..Walmart might not be a bad option. They have the money. They already sell the service and the pricing would be good. 
    Their customer base is similar to ours. Worth mentioning.
    What about Cox Cable? They are getting into the cell phone business.

  • Anonymous

    T-Mobile is going down either way!!  Why are people so convinced that DT will just be “forced” to run Tmobile USA, lol.

  • Anonymous

    T-Mobile is going down either way!!  Why are people so convinced that DT will just be “forced” to run Tmobile USA, lol.

    • http://pulse.yahoo.com/_TMJPXWZ43W5BFC4MHGWBBFWUCQ Dan B

      As much as i don’t want the at&t merger to go through, i don’t want to see DT forced to run it either. ( But would gladly take that over at&t still!). The t-mobile brand will get so bad that metropcs would have a better brand image! I personally hope vodaphone pulls out of verizon and gets tmobile. Run the network right. actually build out. Put some real money here! Compete head on with verizon. They can save a LOT of money letting their own customers around the world roam on t-mobile. As of now, none of them can roam on verizon due to verizons cdma technology.

    • http://pulse.yahoo.com/_TMJPXWZ43W5BFC4MHGWBBFWUCQ Dan B

      As much as i don’t want the at&t merger to go through, i don’t want to see DT forced to run it either. ( But would gladly take that over at&t still!). The t-mobile brand will get so bad that metropcs would have a better brand image! I personally hope vodaphone pulls out of verizon and gets tmobile. Run the network right. actually build out. Put some real money here! Compete head on with verizon. They can save a LOT of money letting their own customers around the world roam on t-mobile. As of now, none of them can roam on verizon due to verizons cdma technology.

  • Elder Mo

    Well the crappy services has started. Three times this week I told TMO I was not interested in converting my current no contact service to a 2 year contract. They are slow learners and don’t want to take no for an answer. The result of saying NO has been disruption of my data service, poor reception an no service in areas where I always have service. Coincidence? or purposeful on the part of TMO. Two calls to TMO customer care finds “nothing wrong”. The third call was the most interesting: “The system shows you used all of your data allocation and have to wait until your account renews”.

    Wait TMO, my data service has been turned off most of the month. I checked it this morning and used only 1.53 mb…so I used 198 mb in less than 4 hours. TMO did further trouble shooting and found that the “wrong imei was registered in the system”. WTF. So if the wrong imei number was in the system how is it that they I could make and receive calls? Now the second line on my plan is experiencing problems with reception, calls going through. In the 5 years I have been with TMO I have never experienced such problems. My service has been very stable. I suspect that the TMO custom care department is f’ing with me for not signing a 2 year contract.

    • Bratty

      Sorry dude, you aint that important to TMo that they will mess with your service.

    • Faren Cline

      imei’s are rarely changed manually and done by the sys automatically with a couple day delay. not to mention you may just be having a network issue that hasnt been tagged to your account. not to mention as well that 198mb is not that hard to use in 4 days, but more than likely you were a flexpay migration and carried data usage from your flex cycle to your post cycle for the first month. 

      I also wonder if you wear foil on your head because the aliens are trying to sell your home insurance and because you dont sign they are messing with your tv reception in your bomb shelter that you sit in every afternoon while dusting your supply of canned goods and cleaning your ak-47

      • Me

        he said 198mb in less than 4hours, not 4days. thats about 50mb every 30mins. Its possible, but highly unlikely. tmobile lost 300,000 post paid customers in june 11. They need more customers to sign a two year contract

  • Elder Mo

    Well the crappy services has started. Three times this week I told TMO I was not interested in converting my current no contact service to a 2 year contract. They are slow learners and don’t want to take no for an answer. The result of saying NO has been disruption of my data service, poor reception an no service in areas where I always have service. Coincidence? or purposeful on the part of TMO. Two calls to TMO customer care finds “nothing wrong”. The third call was the most interesting: “The system shows you used all of your data allocation and have to wait until your account renews”.

    Wait TMO, my data service has been turned off most of the month. I checked it this morning and used only 1.53 mb…so I used 198 mb in less than 4 hours. TMO did further trouble shooting and found that the “wrong imei was registered in the system”. WTF. So if the wrong imei number was in the system how is it that they I could make and receive calls? Now the second line on my plan is experiencing problems with reception, calls going through. In the 5 years I have been with TMO I have never experienced such problems. My service has been very stable. I suspect that the TMO custom care department is f’ing with me for not signing a 2 year contract.

  • Mini Mouse

    T-mobile’s white knight is the man “Limitless” is inspired by. He took over Cisco and John Chambers simply by using his mind. T-mobile Carly was his idea. He’s planning on changing T-mobiles name to “Medusa.” and having it run by women. He’s going to merge Rogers Communications (Canada) with T-mobile and the largest Mexican GSM carrier. You may have seen the T-mobile Mexico ads? You don’t know his mother. He’s also working on merging with one of the British carriers as well. Norway has their Norwegian sovereign fund and $550 billion to donate to his cause. He’s pretty much taking over the world. You will all meet him soon.

    He said JOB from the bible is to blame. Ethan Hunt from Mission Impossible has nothing on Hans Gruber and his white knight. He’s a modern day Thor. Enjoy the show! 

  • NBIQ

    HANG IN THERE TMOBILE USA!

    When all this noise is over and the peanut gallery in the forums, switch to another channel, start running your business like a hungry little startup. 

    • Provide free texting to new contracts.
    • Partner with content providers like Amazon, ESPN, Disney, NBA, Netflix (like cable TV model)• Provide free data streams to the partner sites listed above (Data from partner sites does not detract from the customer’s data limit. Example always allow Disney content. Always allow NBA content.)
    • Make me happy. 
    • Provide iPad/tablet exclusives. Free audio books, free kids book bundles. 
    • Steal back Starbucks wifi hotspot contracts from AT&T (longshot, but I’m thinking large) 
    • Partner with SOMEONE for Mobile Broadband standards/services.
    • Allow massive reselling of your voice plans to third tier providers (house brands, etc)
    • Grow your market share. Apple took her time but the Mac sales are finally a larger percentage of the overall desktop market. 

    You have a role to play TMOBILE USA.. Please show up to this fight. 
    Thank you!

  • Nina

    I really think they should reconsider selling any part of the company to AT&T because all they are trying to do is take all of your customers and screw them over when it comes to their plans. They say that they will honor the plans that customers have now but when this deal is done they are going to give the customers their ASS to kiss. DO NOT LET THIS HAPPEN TO THE CUSTOMERS.

    • Ericd

       Very true, they are only saying what they think is necessary in order to get what they want.  The whole goal is to push the consumers to the ground and take all of the money out of their wallet.

  • Nina

    I really think they should reconsider selling any part of the company to AT&T because all they are trying to do is take all of your customers and screw them over when it comes to their plans. They say that they will honor the plans that customers have now but when this deal is done they are going to give the customers their ASS to kiss. DO NOT LET THIS HAPPEN TO THE CUSTOMERS.

  • Joel

    I agree with Nina. AT&T’s primary interests are to eliminate a part of their competition and then screw them all like their Verizon counterpart (who will be their only true competition). Sprint is a joke in my opinion, and thus a non-factor. The only next best threat would be the pre-paid carries like Metro…which is my next option after T-Mobile. The day I spend $180 for two lines is the day hell freezes over.

  • Joel

    I agree with Nina. AT&T’s primary interests are to eliminate a part of their competition and then screw them all like their Verizon counterpart (who will be their only true competition). Sprint is a joke in my opinion, and thus a non-factor. The only next best threat would be the pre-paid carries like Metro…which is my next option after T-Mobile. The day I spend $180 for two lines is the day hell freezes over.

  • http://www.youtube.com/emceegeek ※ TYL3R ※

    maybe they’ll finally stop trying to scam people out of money and do their jobs properly! 

  • http://pulse.yahoo.com/_7MOKQBK44A5AY4IZP4HNHY4V4M Bob

    I for one would love to see Google buy up T-Mobile.

  • http://pulse.yahoo.com/_7MOKQBK44A5AY4IZP4HNHY4V4M Bob

    I for one would love to see Google buy up T-Mobile.

  • Beau Bennett

    Look, AT&T initially ‘claimed’ they could not afford to upgrade everyone on their network to 4G without buying T-Mobile first.  Then, it was discovered that the upgrade to 4G was only 1/10th the cost of buying T-Mobile. AT&T was caught red-handed in a bald-faced lie trying to rid itself of a competitor. These are the facts folks, like it or not.

    Now, who wants to stay with, or sign-up with a corporation who blatantly lies to the Federal Government and millions of Americans?  Not me.  There are solid, legitimate reasons for people to absolutely hate AT&T.  We have just added a few more reasons.