T-Mobile USA is trying to sell AT&T off again, after it was unsuccessful last year due to the Justice Department. Former telecommunications executive Sol Trujillo has tried approaching private firms like KKR to buy out all or part of the company.
The private equity firms who have heard of this possibility are said to be sceptical because of the size of the firm and cost of financing it. Atlantic Equities analyst Christopher Watts puts a value of $30 billion on the unit and says that the mobile phone frequencies are the most valuable part of this company. T-Mobile has sought to reduce its spending by closing call-centres and jobs. Last year’s $39 billion offer from AT&T to buy the network carrier was rejected by U.S. supervisors and T-Mobile owner Deutsche Telekom has decided to reduce its attention to the States.
At the same time, Trujillo has tried to get support to buyout Sprint. Firms like Blackstone favour LBOs that offer leverage to buy a company for as little as possible, financing the rest by selling off the non-essential parts of the company and using cash from operations. According to Tom Taulli, an M&A consultant, financing is currently cheap. However, Taulli points out that there haven’t been many $10 billion plus LBOs off late.
In fact, they are finally realizing that this acquisition may not happen at all. In that case, they are trying to pay the break up fee and looking to strike a roaming contract. They didn’t go down quietly though, accusing the US government of blocking them even though there was enough spectrum to encompass their services. AT&T asserts that something must be done or else “customers will be harmed and needed investment will be stifled.” AT&T goes on to urge lawmakers to approve its bid to acquire spectrum from Qualcomm.
AT&T will pay the $4 billion breakup fee, and will enter into a roaming deal with Deutsche Telekom.
