AT&T Expects to Divest Before T-Mobile Merger is Completed

On March 20, 2011, AT&T T and Deutsche Telekom AG announced that they entered into an agreement under which AT&T will acquire T-Mobile USA from Deutsche Telekom in a cash-and-stock transaction valued at approximately $39 billion. The agreement was approved by the Boards of Directors of both companies. In a Wall Street Journal report yesterday, AT&T is said to have hired Bank of America Merrill Lynch BAC to advise the telecom giant on a potential sale of its $8 billion customer and wireless spectrum business. This potential divestiture is said to be motivated by a desire to win anti-trust compliance from the FCC. Benzinga recently reached out to AT&T on the validity of this potential divestiture. "As we said on the day we announced the merger with T-Mobile USA, we anticipate there will be some divestitures, as we have had in past mergers," an AT&T spokesperson told Benzinga. "But any speculation about the amount of divestitures is premature." After the announcement, AT&T's CEO Randall Stephenson stated, "We anticipate there will be some markets we will have to divest." However, politicians may see it a different way. Senator Herb Kohl voiced his opinion soon after the proposal. Kohl stated that the deal “would likely cause substantial harm to competition and consumers would be contrary to antitrust law and not in the public interest, and therefore should be blocked by your agencies." Tom Sugrue, T-Mobile senior vice president of Government Affairs, issued the following statement on Senator Kohl's decision to oppose the AT&T/T-Mobile transaction. "We are disappointed to learn of the position taken by Sen. Kohl on the proposed merger between AT&T and T-Mobile USA. While we have a great deal of respect for Sen. Kohl, we strongly disagree with his analysis of this transaction, which will bring significant benefits to American consumers. The proposed merger is currently being carefully scrutinized by the Department of Justice and the FCC, and we are confident that the review process will demonstrate that the merger is fully consistent with the antitrust laws and significantly advances the public interest." The potential of this deal could put pressure on competitors like Sprint S and Verizon VZ. Since the merger proposal, shares of Sprint have been trading over 35% lower, while shares of Verizon are flat and shares of AT&T are trading about 4% higher.