AT&T/T-Mobile USA: a joint-venture rather than a merger?

With the merger plans between AT&T and T-Mobile USA having met a lot of resistance; alternatives are now being looked at – including the forming of a joint-venture.

In calling for an in-depth investigation of the project while also being hostile to the merger going ahead, the American telecom regulator – the FCC (Federal Communications Commission) has pretty much stopped the merger of carriers AT&T and T-Mobile USA (controlled by Deutsche Telekom) in its tracks, with many fearing the creation of a giant carrier.

The 39 billion dollar project still remains a possibility, but its chances of going through are slim according to observers, leading to the carriers investigating alternative options.
 
According to the Wall Street Journal, AT&T and Deutsche Telekom are actively thinking about the possibility of forming a joint-venture which would bring together AT&T and T-Mobile USA’s resources, rather than continuing with a merger.


A high risk merger
Such an idea still remains plan B, with it only being looked at as a replacement plan if the merger can’t go ahead. This structure would nevertheless provide the advantage of getting around some of the criticisms being put forward about the eventual emergence of another telecom giant in the US market which is seen as being anti-competitive.

Everything will depend on the way that the joint-venture is put together though, along with how resources will be integrated into the single entity. This solution could also mean that the 3 to 4 billion dollar break fees that AT&T will have to pay Deutsche Telecom if the merger doesn’t go ahead can be redeployed by the merged entity.

At this time, receiving approval for a merger remains AT&T’s main objective, with the carrier undertaking discussions with smaller US carriers to counter the criticism’s being put forward by regulators

AT&T has refocused their efforts to try and convince the American Justice Department of the merits of such a takeover, allowing them to gain an initial approval.