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9/21/2011
00:28 AM
Ed Hansberry
Ed Hansberry
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AT&T Considers Asset Sale To Save T-Mobile Deal

Would selling subscribers or spectrum reduce opposition from government and competitors? AT&T hopes so.

With its takeover deal for T-Mobile crumbling around it, AT&T is looking for ways to keep the deal alive. One of the strikes against the acquisition is that the resulting company would be too large. When this happens in a big merger or acquisition, the companies will negotiate to sell some assets to competitors, keeping the playing field a bit more level. That is the strategy AT&T is currently investigating.

Bloomberg reported that AT&T has reached out to MetroPCS, Leap Wireless, Dish Network, CenturyLink, US Cellular, private equity firms, and even Sprint. AT&T is willing to part with some of its spectrum and a portion of its subscribers.

Parting with spectrum is one thing. Moving subscribers around is totally different. If you are on AT&T or T-Mobile and get sold to another carrier, you'll likely be forced to get a new phone with a different contract, and will face the general hassle of switching. You can forget keeping your current plan. Heaven forbid you are sold to one of the smaller regional carriers. Then you face the prospect if not being able to buy an equivalent smartphone. Seen any iPhones on smaller carriers lately?

The problem of the new company having a competitive advantage due to its size can't be solved by selling subscribers like chattel. That only makes the numbers look better on some regulator's desk, but it ticks a lot of people off. If they wanted to be on a different carrier in their region, they'd be there already.

Making the deal just a bit more unlikely, the ninth largest carrier in the United States, Cellular South, has filed its own suit to block the merger on antitrust grounds. Cellular South is echoing the general sentiment around the deal: "If AT&T were to complete this deal, not only would it substantially lessen competition, but it would essentially consolidate the market into the hands of the Big Two--AT&T and Verizon."

Despite the lawsuit by the U.S. Department of Justice, supported by seven states, and opposition from the competition, Piper Jaffray & Co. analyst Chris Larsen thinks the deal has a "good possibility" of closing.

I am not so optimistic.

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