AT&T and Deutsche Telekom may not be seeing eye-to-eye on T-Mobile deal

In front of the media and U.S. regulators, AT&T and Deutsche Telekom act like that couple from high school that were always holding hands in front of everyone, but in private were always fighting. According to Bloomberg, the pair act all lovey-dovey when the talk is about getting the AT&T purchase of T-Mobile closed. But when it comes to strategy when times get tough and regulators are stepping in front of the deal trying to block it, then both companies have divergent paths to take to protect their self-interest.

The problem is that with the DOJ seeking to put the deal on ice for good, it is in AT&T's best interest to keep the entire process going as long as possible, according to fund manager Leon Cappaert of KBC Asset Management in Brussels. On the other hand, Deutsche Telekom would rather take all of its marbles and go home now, if it appears that the deal is dead. Any extended time that T-Mobile's future looks undecided is time that other carriers could use to continue poaching customers away from the nation's fourth largest carrier.
 
The board at Deutsche Telekom still has the back of CEO Rene Obermann, but some members are getting itchy to go back to other potential suitors and try to re-open talks with some of them. The problem is that with a contract still in effect, the board is frozen and cannot legally approach other companies. Deutsche Telekom Chief Financial Officer Timotheus Hoettges said that the company spoke with 5 potential suitors interested in T-Mobile before the AT&T bid was announced.

The deal will either close or the contract will be voided by regulatory issues. If the latter occurs, T-Mobile could be put back up for sale or possibly be taken public. It is estimated that in a public offering, the U.S. carrier would be valued at $28 billion vs. the $39 billion that AT&T is willing to pay for the mobile operator. And there is also the matter of the $6 billion in cash and assets that AT&T must pay to Deutsche Telekom as a break-up fee. Under certain circumstances, AT&T might not be required to pay the fee. For example, if  U.S. regulators have not agreed to the deal by a specific date, or if the value of T-Mobile declines under a certain figure, AT&T is not liable to make the payment as we reported. The longer that T-Mobile remains in limbo, the higher the chance that the regulators fail to approve the deal by the date that would require AT&T to make the payment. Also, as T-Mobile remains in limbo, the odds favor the carrier losing value, perhaps enough as to cancel the break-up fee. This is another reason why AT&T wants to stretch the matter out while Deutsche Telekom favors a quick resolution. Of course, if it must pay the $6 billion in cash and assets, it helps AT&T's financial position to put off paying the break-up fee until the last possible moment.

While AT&T has asked for an expedited hearing and the judge handling the case is said to work quickly, it could still be months before the final words have been spoken on the legal front. If AT&T is blocked from buying T-Mobile, by waiting just as long as possible to give up the deal, AT&T improves its standing in the U.S. mobile carrier landscape by weakening T-Mobile. Sprint and Verizon would benefit as well which might make a cynic wonder if Sprint's constant calls for the deal to be blocked is just a way to stretch out the process and leave a bloodied and battered T-Mobile too weak to try to catch up to the carrier directly above it.

As we informed you, the judge overseeing the case has ordered all parties involved to sit down and try to work out a settlement on September 21st.

source: Bloomberg via TmoNews