AT&T WILLING TO MAKE HUGE CONCESSIONS TO ACQUIRE T-MOBILE'S USA ASSETS

AT&T may propose to divest as much as 40% of T-Mobile USA’s assets in an effort to win approval from the Department of Justice in an upcoming lawsuit against the government agency. The DOJ sued to block the merger on August 31st, when it said “AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market.” AT&T is planning to divest a lower percentage of spectrum and a higher share of T-Mobile USA’s customers, Bloomberg said Monday. The divestiture may not be enough to add balance to the market, however. “It’s unlikely that the DOJ would allow a big competitor like Verizon to purchase the assets,” Macquarie Securities analyst Kevin Smithen told Bloomberg, which means AT&T may need to rely on smaller regional carriers to pick up the customers and spectrum.

“[DOJ] guidelines require that any settlement or remedy replace the market power T-Mobile currently brings to the marketplace,” Sprint’s spokesperson for public policy John Taylor wrote on his personal blog. “Any new entity would have to create a nationwide network comparable to T-Mobile’s, which covers 97% of America… [and] offer exclusive handsets, just as T-Mobile does each year. AT&T would have to divest enough T-Mobile customers to ensure that any new entity or purchaser of the assets would have the same market share T-Mobile enjoys.”

Wall Street isn’t so sure the divestiture will help AT&T’s cause, either. “Realistically, AT&T is going to take its chances in court in February,” Sanford C. Bernstein analyst Craig Moffet said. “It’s all or nothing.”

On November 24th, AT&T withdrew its original application from the FCC to acquire T-Mobile USA and said it will instead focus on its lawsuit with the Department of Justice, which kicks off in February, before it reapplies for the FCC’s approval of the acquisition.