Why does AT&T have to pay Sprint $4 Billion just because the feds didn’t want AT&T to buy them.
Don’t get me wrong, it’s not like I wanted them to merge, I just can’t figure out why the agreement was written so that if the deal didn’t go through (which was decently likely if you have a working brain) then AT&T had to pay Sprint 4,000,000,000 big ones?
What were they thinking?
Shoot, mixed up the companies. All those small insignificant moble carriers look the same!
Mods, can you fix the title?
It’s kind of like the earnest money you have to put up when you make an offer on a house. Before T-Mobile’s management can accept a deal like that they want to make sure that it will be very painful for AT&T to back out of the deal and that they won’t just wake up one morning and say “What were we thinking?!” or “Sorry, we found a better deal.”
For one thing T-Mobile had to take itself off the market and give up the possibility that a better deal might come along.
It also had to devote a lot of time and energy to the merger. Instead of working on ideas to grow the business, executives, lawyers, and other staff had to devote months of their time and large amounts of money to preparing studies, testifying, lobbying the government, public relations, filing petitions, and so on.
And it had to put competitive plans on hold. The marketing department had to stop running ads saying “AT&T is over priced and has poor service. Switch to T-Mobile today!” Instead their PR department had to put out press releases saying how wonderful AT&T is and how the merger with such a fine forward-looking company will improve service to their customers and bring about communications nirvana.
And if the merger flops, T-Mobile becomes damaged goods. Their reputation suffers and the willingness of other suitors to pay the big bucks decreases.
And they had to put up with stuff like this.
The mods don’t read every single post of every single thread so they might not see this request. If you want a mod’s attention, use the “report” button.
Yea, I did that also, but I thought I would mention it in the thread too.
This exactly it. It’s common for a major buyout deal to include a penalty if the deal doesn’t go through.
Clicking on that leads to a warning that you’re stealing content from Wireless and Mobile News.
I don’t know what other people think, but I see no need for that.
Sorry about that. I just clicked from two different computers and didn’t get any kind of warning.
Try this link.
I was having dinner with a bunch of ex-Pacific Bell/SBC/ATT folks the other night. This was a topic of much interest, and we wondered if the guys who made that 4 billion dollar gamble would get a bonus this year.
[COLOR=black][FONT=Trebuchet MS]Most of what you guys have said makes sense, I just can’t believe that AT&T was willing to gamble $4 billion that the deal would go through.
Did they even poll the general public or the federal government about what they thought before plunking down that money? There was outrage over the deal from the second it was announced from the public and government sector.
I just find it hard to believe that they bet that money on something that a 10 year old could have told them would have been controversial. [/FONT][/COLOR]
[moderating]
Thread title changed from “Why does AT&T have to pay Sprint $4 Billion?” to “Why does AT&T have to pay T-Mobile $4 Billion?” at OP’s request.
[/moderating]
All large telecom mergers will be controversial. It’s the nature of the game.
I could see the liquidated damages if AT&T backed out for no good reason, but the feds nixing the deal wouldn’t put the breach of contract on AT&T. Couldn’t they use some kind of impossibility defense?
It depends on how the deal was negotiated. AT&T wanted the cooperation of tmobile’s management. Hostile takeovers tend to be more expensive.
A few months ago, when the Google-Motorola Mobility deal was announced, I happened to be visiting a friend of mine who used to work in mergers and acquisitions for a Big 5 accounting firm. Since I…let’s say, used to have a bit of a connection to one of those companies..I was interested in the details. One of the things he mentioned was that the payoff for the deal falling apart was quite standard.
-D/a
Will they? Was there this much hubbub when Verizon bought out Alltel? Verizon paid $28 billion for Alltel. I wonder what the former customers think of their new service provider.
Well, obviously how controversial the merger is depends on who is in the white house at the time. But also, each merger makes the next one more controversial. When there were a dozen major cell phone companies, nobody cared if two of them merge. But since this merger would have taken us down to only 3 (AT&T/T-mobile, Sprint, and Verizon), the fear of a monopoly/oligarchy gets much stronger.
I agree with the other posters – as soon as I heard about the t-Mobile deal, I immediately thought, “great, now there will be even LESS competition in phone server. Will they really be able to get this by the anti-trust laws?” Everyone involved in the deal should have known there was an extremely real possibility that the deal would be blocked, so I’m surprised AT&T didn’t negotiate a “breakup fee doesn’t apply if the government merger team blocks us through no fault of our own” clause.
It’s not like this this penalty is a big mistake on AT&T’s part. The people in this thread don’t have any information that they didn’t have. T-Mobile also knew and that’s exactly why they insisted on it. This was the price of the deal and AT&T agreed because they knew there would be no deal without it. The risk of loss is the price of business.
Also, after taxes it’s 1.5B, not 4B
Cite
