T-Mobile Wants $1B Break-Up Fee If Sprint Deal Fails

Posted by at 1:47 pm on May 12, 2014

Sprint-Tmobile-LogoT-Mobile and Sprint are weighing several big factors ahead of a potential merger between the two.

To start, Deutsche Telekom, a two-thirds owner of T-Mobile, is demanding a break-up fee of at least $1 billion if the merger is shot down by U.S. regulators. Deutsche Telekom scored an important break-up fee with AT&T that ended up giving the smaller operator cash, spectrum, and roaming agreements – all of which have helped it reinvigorate its business. Second, Deutsche Telekom wants top T-Mobile executives to remain in place during and after any sort of regulatory review, and it wants the T-Mobile brand to remain in place. This means the company would prefer to see T-Mobile CEO John Legere head the combined company rather than Sprint CEO Dan Hesse.

The companies have not yet agreed to these terms, according to sources cited by The Wall Street Journal. Further, Sprint and T-Mobile are waiting for several outside developments to proceed. For example, the Federal Communications Commission is set to vote on the spectrum screen during its May 15 meeting. If the FCC puts its proposed changes in place – which would add Sprint’s 2.5GHz spectrum holdings to the screen – it could impact whether or not T-Mobile and Sprint move forward at all.

The two companies may also wait to see how the 2015 spectrum auction shakes out, or wait until there’s a new administration overseeing the FCC and U.S. Department of Justice. Regulatory bodies have already indicated they prefer to see four national carriers, rather than three. T-Mobile and Sprint are attempting to work around those concerns.

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