Chillin' out till it needs to be funded
Confused about the headline? You should be. Just when the crisis struck in 2008, T Mobile in the USA and Microsoft in the USA were strong candidates for the true global corporation on both sides of the pond. While T Mobile did grow very fast and very strong, especially as the US mobile providers were defined by the archetypal old technology driven Sprint and Verizon when GSM landed off the pond’s biggest airport at Newark.
Taking East Coast seemed relatively a piece of cake for T Mobile given the vast gaps in service coverage in the US and the penchant for changing providers, bill plans and posting all sorts of new charges in the monthly phone bills to landline customers in the USA, not to mention the myriad bell takeover and demerger stories that interspersed the already patchy conversation you could have on your mobile.
AT&T’s rise thence was a later phenomenon and one that warmed the cockles of the Patriots and strangely also Apple who rode the iPhone ( which currently ships a 15 billion pieces a year with AT&T and now has added Verizon to the stable.
Enough of the meandering introduction then as the $100 per subscriber ( Reuters Insider) pricing for T Mobile being paid by AT&T is the topic for the dealbook discussions herewith
However a review of the NY Times Dealbook (Andy Sorkin) shows us the folly of our thinking as Deutsche Telekom, the T Mobile parent company actually made a hefty $40 billion purchase in T Mobile ( then Voice stream) in the USA for $40 billion and as far as the Germans were concerned it was solely responsible for their $25 billion loss in 2002.
Also seemingly as an aggressive competitor AT&T always had a better hold on T Mobile’s pricing and as of last quarter of 2010 T Mobile remained 4th in the USA despite being a profitable entity and its exit at $ 39 billion is a great deal for the Blackstone owned German Such are the dreams we weave..
The situation on the ground however is unlikely to change much with both T-Mo and AT&T sharing a modern aggressive brand on the get go and T-Mo’s wide distribution in the states that matter for AT&T a big plus despite the higher 4% churn from T
Interestingly the deal is also likely to propel the European upstart Credit Suisse ( in a damningly sweet exercise since 2008 to woo EMs with research and love and affection but seemingly growing in the US with this deal) ahead of Merrill Lynch in the Dealogic rankings in M&A advisory and Corp Finance for 2011 also giving hope to the never good enough Morgan Stanley to step up to the Gold
AT&T expects the costs to repay in cost cuts amounting to $40 billion directly andits 130 million customers putting it ahead of Verizon’s 90 and Sprints 65million deservingly. Under the terms of Sunday’s deal, AT&T would pay $25 billion in cash and the rest in stock. Deutsche Telekom would gain an 8% stake in AT&T and a seat on its board.
Of course whether Anti trust would instead favor Sprint’s opinion in this case is a likely outcome than a lower risk but even Continental and United have been able to go ahead with their deal. WSJ’s chart of the largest deals puts the deal at no. 5 , a showcase of the power of big pharma and a measure of the mispricing in those other mstock based deals which would not be as big in influence and market impact. However this deal is funded by cash worth $25 billion, more than 60% of the deal value and DT seems to be happy with one board seat. AT&T also mirrors T Mobile in its in capability to make its presence felt outside home AT&T wants the deal for the spectrum shortage it would solve ( IT has recently also introduced limits on Netflix customers by removing unlimited packages from its services)