Deutsche Telekom Seeking $1 Billion if Sprint Bid for T-Mobile is Blocked
Published on: 12th May 2014
USA based Sprint could be asked to pay a heavy price if its expected attempt to buy rival network, T Mobile USA is blocked by the regulators.
In order to approve the takeover, Germany's Deutsche Telekom, which owns two-thirds of T-Mobile USA, is expected to demand a USD1 billion fee from Sprint if the deal is blocked by the regulators.
Although Deutsche Telekom is generally thought to be open to an offer to sell its stake in T-Mobile to Sprint, such a deal is likely to face huge regulatory hurdles. Such a risk is why the German firm is said to be seeking such a large break-up fee.
If the deal does fail, then T-Mobile would get a windfall in cash, while Sprint could be seriously hurt by the payout, and the lack of expected cost-savings from the merger.
T-Mobile has form in agreeing to a deal then walking away intact with a pot of cash. AT&T was forced to pay USD3 billion when its own attempt to take over the company was blocked by the regulators.
Sprint may need to launch its own bid quickly though, as it could find a forthcoming review of its spectrum holdings would take its existing stock over the regulatory limit -- and that is before a takeover of T-Mobile.
On the web: Wall Street Journal