Wednesday, December 21, 2011

AT&T Cash Will Not Help T-Mobile USA

The $3 billion cash payment AT&T has to pay to Deutsche Telekom as part of a break-up fee for the collapse of the deal whereby AT&T was to buy T-Mobile USA will not help T-Mobile USA at all. All of that cash will be used by parent Deutsche Telekom to pay down debt. 

As part of the break-up fee, T-Mobile USA will receive a large package of  mobile spectrum in 128 “Cellular Market Areas,” including 12 of the top 20 markets (Los Angeles, Dallas, Houston, Atlanta, Washington, Boston, San Francisco, Phoenix, San Diego, Denver, Baltimore and Seattle).

Likely of greater immediate importance is a seven-year roaming agreement that will allow T-Mobile USA to improve its footprint significantly. Population coverage will increase from 230 million potential customers at present to 280 million.

As a result of the agreement with AT&T, coverage will be extended to many regions of the United States in which T-Mobile USA previously had neither its own high-speed mobile communications network nor the associated roaming agreements. AT&T cash won't help T-Mobile USA

The cash component of the break-up fee directly reduces Deutsche Telekom’s net debt, thereby by strengthening the financial performance indicators affecting the company’s rating.

No comments:

Post a Comment