AT&T Meets With Rivals to Save T-Mobile Deal

AT&T is approaching smaller carriers to discuss selling off parts of its spectrum and subscriber base, in a bid to save its $39 billion acquisition of T-Mobile.

The Dallas, Texas-based carrier approached MetroPCS, Leap Wireless, CenturyLink, Dish and Sprint to gauge their interest in buying assets, according to Bloomberg, which cited two people with direct knowledge of the discussions.

The carrier aims to save its deal to acquire T-Mobile after the Justice Department filed suit to stop the deal on August 31. Earlier this week, seven states joined the DoJ in an attempt to block the merger.

Both AT&T and the DoJ are scheduled to meet in court on September 21 over the possibility of a settlement.

The acquisition of T-Mobile would make AT&T the largest carrier in the U.S. The company says the merger is necessary to accommodate the heavy data demands of its subscribers, and will also create jobs and bring coverage to rural areas. AT&T’s future growth hinges heavily on expanding its spectrum, and the T-Mobile deal is a major move in its strategy.

Rivals like Sprint, however, object to the deal, saying it will quash competition by creating a duopoly of AT&T and Verizon in the wireless industry that will lead to higher prices and less consumer choice. The DoJ’s suit against the merger is one of the strongest indications the deal may be losing its momentum.

Discussions with competitors are preliminary and may not lead to a deal, and sales of spectrum and subscribers may still not be enough to appease the DoJ, said the sources, who declined to be identified by Bloomberg because talks are private.

Selling assets may address some points of contention, but fundamental objections to stifling choice and competition, cited by the DoJ in its suit, may still remain despite AT&T’s measures. The DoJ has historically opposed horizontal mergers like the AT&T’s deal, and the shift in major industry dynamics that would result from the merger may be the DoJ’s primary concern.

If regulators reject the deal, AT&T must pay $3 billion to T-Mobile owner Deutsche Telekom as part of its pre-nup agreement with the wireless network. The carrier must also give T-Mobile free spectrum in some regions and reduce charges for T-Mobile customers who make calls to AT&T subscribers.

AT&T clearly is doing everything in its power to push the merger through or create a settlement with the DoJ on its own terms, but the regulator may either demand more drastic measures or scuttle the deal altogether. The carrier may still choose to proceed with a trial, but litigation would be costly and lengthy for both parties, which bodes ill for AT&T in a fast-moving industry.

This post originally appeared at Mobiledia.

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