AT&T,T-Mobile USA break-up is $6 billion: sources
By Nadia Damouni and Paritosh Bansal
NEW YORK (Reuters) - AT&T Inc <T.N> has promised to give Deutsche Telekom <DTEGn.DE> $6 billion in assets, services and cash as a break-up fee if U.S. regulators reject its proposed $39 billion purchase of the German company's T-Mobile USA, according to sources familiar with the matter.
The $6 billion would include $3 billion of cash, as AT&T has previously disclosed, and about $2 billion worth of spectrum and a roaming agreement valued at $1 billion, according two sources who asked not to be named as those details were not public.
AT&T declined comment for the story.
While the cash agreement is already unusually high at 7.7 percent of the total deal price, the addition of assets and services of a similar value would mean that the companies are breaking global records with a 15.4 percent break-up fee, according to Thomson Reuters Data.
The high fee underscores AT&T's confidence that it can convince regulators to approve the deal, which is already being heavily criticized by many consumers and AT&T rivals including No. 3 U.S. mobile service Sprint Nextel <S.N>.
The acquisition of T-Mobile USA, ranked No. 4, would enable AT&T, currently the No. 2 U.S. mobile service, to leapfrog the leader of the U.S. market, Verizon Wireless, a venture of Verizon Communications <VZ.N> and Vodafone Group Plc <VOD.L>.
The deal needs approval from the U.S. telecommunications regulator, the Federal Communications Commission, and the Department of Justice, which examines antitrust issues around mergers.
AT&T's chief executive, Randall Stephenson, had to defend the deal at a hearing held by skeptical lawmakers in Capitol Hill on Wednesday.
Based on valuations in past spectrum sales, $2 billion would pay for roughly 10 megahertz of spectrum, according to Fabricio Martinez, a UK-based consultant from Aircom International.
This is the minimum necessarily to offer high-speed wireless services based on the emerging technology Long Term Evolution (LTE), according to analyst estimates.
Martinez estimated that 10 megahertz would double T-Mobile USA's current available spectrum for high-speed services.
But he noted that "ideally a carrier would want 20 megahertz," for LTE services to perform well.
T-Mobile USA would be able to increase its current data speeds by only once and a half times using 10 megahertz for LTE, according to Martinez, who said that if it had 20 megahertz it could increase data speeds by four times.
AT&T shares were up 37 cents, or 1 percent, at $31.75 in afternoon trade on the New York Stock Exchange.
(Additional reporting by Sinead Carew; Editing by Steve Orlofsky)