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.
“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/
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=“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.
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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