# Why does AT&T have to pay T-Mobile $4 Billion? **URL:** \ **Category:** Factual Questions\ **Created:** [December 20, 2011, 1:37pm UTC](https://boards.straightdope.com/t/why-does-at-t-have-to-pay-t-mobile-4-billion/606841 "2011-12-20T13:37:52Z")\ **Posts on this page:** 6\ **Page:** 2
**Author:** ![mundylion](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mundylion/32/3604_2.png) [@mundylion](https://boards.straightdope.com/u/mundylion)\ **Post date:** [December 22, 2011, 7:57pm UTC](https://boards.straightdope.com/t/why-does-at-t-have-to-pay-t-mobile-4-billion/606841/21 "2011-12-22T19:57:32Z")
> [@The\_Niply\_Elder](#): > > Cite Cite what, the tax code? The fee is a deductible expense, corporate tax rates are 30 to 40% state and federal, so after tax effect is smaller. ---
**Author:** ![gazpacho](https://avatars.discourse-cdn.com/v4/letter/g/6f9a4e/32.png) [@gazpacho](https://boards.straightdope.com/u/gazpacho)\ **Post date:** [December 22, 2011, 7:59pm UTC](https://boards.straightdope.com/t/why-does-at-t-have-to-pay-t-mobile-4-billion/606841/22 "2011-12-22T19:59:58Z")
> [@mundylion](#): > > Cite what, the tax code? The fee is a deductible expense, corporate tax rates are 30 to 40% state and federal, so after tax effect is smaller. 1.5 billion is not 60% to 70% of 4 billion. ---
**Author:** ![RaftPeople](https://avatars.discourse-cdn.com/v4/letter/r/6f9a4e/32.png) [@RaftPeople](https://boards.straightdope.com/u/RaftPeople)\ **Post date:** [December 23, 2011, 6:32pm UTC](https://boards.straightdope.com/t/why-does-at-t-have-to-pay-t-mobile-4-billion/606841/23 "2011-12-23T18:32:27Z")
> [@The\_Niply\_Elder](#): > > Cite “AT&T will pay Deutsche Telekom $4 billion in cash and wireless spectrum access as a break-up fee under the terms of the merger announced in March. After taxes, however, the financial hit to AT&T will be only about **$1.5 billion** , or roughly two months’ worth of cash flow. The two companies will now begin a seven-year roaming agreement that will expand T-Mobile’s national coverage.” [http://dealbook.nytimes.com/2011/12/19/att-withdraws-39-bid-for-t-mobile/](http://dealbook.nytimes.com/2011/12/19/att-withdraws-39-bid-for-t-mobile/) ---
**Author:** ![Gary\_Robson](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/gary_robson/32/3448_2.png) [@Gary\_Robson](https://boards.straightdope.com/u/Gary_Robson)\ **Post date:** [December 23, 2011, 10:27pm UTC](https://boards.straightdope.com/t/why-does-at-t-have-to-pay-t-mobile-4-billion/606841/24 "2011-12-23T22:27:17Z")
> [@RaftPeople](#): > > “AT&T will pay Deutsche Telekom $4 billion in cash and wireless spectrum access as a break-up fee under the terms of the merger announced in March. After taxes, however, the financial hit to AT&T will be only about **$1.5 billion** , or roughly two months’ worth of cash flow. The two companies will now begin a seven-year roaming agreement that will expand T-Mobile’s national coverage.” That isn’t saying that T-Mobile is only getting $1.5B after taxes. It’s saying that the net effective cost to AT&T is only $1.5B – presumably because they’ll use the full $4B all at once as a write-down against profits. ---
**Author:** ![RaftPeople](https://avatars.discourse-cdn.com/v4/letter/r/6f9a4e/32.png) [@RaftPeople](https://boards.straightdope.com/u/RaftPeople)\ **Post date:** [December 24, 2011, 12:34am UTC](https://boards.straightdope.com/t/why-does-at-t-have-to-pay-t-mobile-4-billion/606841/25 "2011-12-24T00:34:09Z")
[quote=“Gary “Wombat” Robson, post:24, topic:606841”] That isn’t saying that T-Mobile is only getting $1.5B after taxes. It’s saying that the net effective cost to AT&T is only $1.5B – presumably because they’ll use the full $4B all at once as a write-down against profits. [/QUOTE] Yes, that’s what I was saying, AT&T is out less due to taxes (net), T-Mobile, of course gets 4B. ---
**Author:** ![IAmNotSpartacus](https://avatars.discourse-cdn.com/v4/letter/i/cc9497/32.png) [@IAmNotSpartacus](https://boards.straightdope.com/u/IAmNotSpartacus)\ **Post date:** [December 24, 2011, 5:44am UTC](https://boards.straightdope.com/t/why-does-at-t-have-to-pay-t-mobile-4-billion/606841/26 "2011-12-24T05:44:10Z")
> [@RaftPeople](#): > > Yes, that’s what I was saying, AT&T is out less due to taxes (net), T-Mobile, of course gets 4B. No, that’s incorrect. Cash and valuable assets are being conflated in this thread. T-Mobile is getting $4 billion worth of consideration. This includes over 100 AWS licenses and a roaming agreement that increases their coverage footprint. AT&T is paying $3 billion in cash. It stands to reason the AWS licenses and roaming agreement are worth one billion. How the article linked above arrives at an after tax cost of $1.5 billion is questionable. They don’t explain their methods. Not all taxes are created equal. AT&T’s stated effective rate in 2010 was -6.4% according to their annual report. [http://www.att.com/Common/about\_us/annual\_report/pdfs/ATT2010\_Full.pdf](http://www.att.com/Common/about_us/annual_report/pdfs/ATT2010_Full.pdf) [Previous page](https://boards.straightdope.com/t/why-does-at-t-have-to-pay-t-mobile-4-billion/606841.md?page=1)