AT&T, Deutsche Telekom eye joint venture as fallback

Reuters

AT&T Inc (Dallas, Texas, U.S.A.) and T-Mobile USA's parent Deutsche Telekom (Bonn, Germany) have discussed options including forming a joint venture to pool the wireless operators' network assets if AT&T's proposed $39 billion plan to buy T-Mobile USA (Bellevue, Wash., U.S.A.) fails, the Wall Street Journal reported.

However, the story, which cited unnamed people familiar with the matter, said the talks were "not advanced" and were "a plan the companies have on the back burner." But since the companies are facing regulatory opposition to the deal, it is a plan they are "likely to take a closer look at," the people said, according to the report.

AT&T representatives were not immediately available to comment on the story. Deutsche Telekom spokesman Philipp Kornstaedt said the German company was still completely focused on winning approval for the proposed acquisition.

"There is no Plan B," he said, reiterating previous comments from Deutsche Telekom.

Whether or not a joint venture would be approved by antitrust enforcers would depend on how such a venture is structured, a source familiar with the matter told Reuters.

"If they want to share networks, there are lot of ways to do that without raising antitrust issues, but the devil is in the details," said the source, declining to be further identified.

In the event that the companies win approval for the deal on condition that they divest some assets, Deutsche Telekom has communicated to AT&T that it could provide "a few billion dollars" of financing for a buyer of any related divestitures, two sources familiar with the matter told Reuters.

Some analysts have questioned whether AT&T will be able to find buyers for asset divestitures to please regulators. The Journal quoted sources as saying that AT&T is expected to make an informal proposal to the U.S. Department of Justice about divestitures in coming days.

The DOJ sued to block the deal in August due to concerns it would harm competition and that case is due to go to trial in February. AT&T withdrew its deal application with the U.S. Federal Communications Commission on Tuesday so it could first focus on the antitrust case.

The same day, the FCC released a 109-page analysis and findings report on AT&T’s proposed acquisition. In the report, the FCC said the acquisition would limit competition and higher prices for customers.

In response to the analysis, AT&T released a statement from Jim Cicconi, senior executive vice president of external legislative affairs, which called the FCC’s decision to release the analysis “troubling.”

“This report is not an order of the FCC and has never been voted on,” says Cicconi. “It has no force or effect under law, which raises questions as to why the FCC would choose to release it.  The draft report has also not been made available to AT&T prior to today, so we have had no opportunity to address or rebut its claims, which makes its release all the more improper. ”

In the report, the FCC said that AT&T submitted an Economic model, but that it “does not provide any basis to conclude that there would be no harm to consumers.”

Instead, the FCC states that the Economic Model submitted leads them to believe that prices will increase, therefore hurting consumers.

 (Reporting by Sinead Carew, Nicola Leske and Nadia Damouni in New York, Jeremy Pelofsky in Washington DC; Editing by Gary Hill and Tim Dobbyn)

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