AT&T Unlikely to Avoid Multi-Billion Dollar T-Mobile 'Break Up' Fee

AT&T could still be forced to pay Deutsche Telekom a termination fee of at least $3 billion, even if U.S. regulators ultimately block AT&T's $39 billion takeover of Deutsche-owned T-Mobile.

AT&T's SEC filing, dated March 2011, states: "The Stock Purchase Agreement contains certain termination rights for each of the Company [AT&T] and Deutsche Telekom and, in the event that the Stock Purchase Agreement is terminated because of the failure to obtain regulatory approval, the Company may become obligated to pay Deutsche Telekom $3 billion in cash, enter into a roaming agreement with Deutsche Telekom on terms favorable to both parties and transfer to Deutsche Telekom certain wireless AWS spectrum that the Company does not need for its initial LTE roll-out."

This suggests that no matter what, AT&T might have to fork over $3 billion in cash, plus billions more in spectrum and wireless capacity, even if the deal–currently in the hands of a federal court–falls through. According to the filing, the break-up fee even applies if AT&T flexes its right to terminate the deal for a variety of reasons, like a protracted amount of time needed to pass the deal, or if has to make concessions valued at more than $7.8 billion.