March 28, 2011
Let the Regulators Work It Out: AT&T's New Deal Policy?
Following the announcement of the AT&T merger with T-Mobile, theories abound about the potential value and goals of the proposal. Over at the Wall Street Journal Deal Journal, it was noted that some believe AT&T may not care if it gets all or most of T-Mobile, as long as they get a sizable chunk:
Citadel Securities weighed in with a very intriguing notion: Maybe AT&T doesn’t plan to buy all of T-Mobile, after all?
[W]e now believe AT&T’s strategy may not necessarily require getting full (or almost full) approval for the deal – nor do we think AT&T plans to call off the deal and pay the $3B reverse breakup fee. Rather, we think AT&T may simply be intent on acquiring however much of TMobile the regulators allow, and divesting the rest as required…..
Our read of the Stock Purchase Agreement filed Monday suggests AT&T is ready to divest up to 40% of T-Mobile’s subscribers –and we think AT&T may not be opposed to divesting even more in order to get the deal closed.
This is an interesting notion, and it is certainly possible. If so, though, I find it disappointing. It's one thing to structure a deal you think can work (or hope can work) to see what happens. It's quite another to just proceed and see what you can get without assessing the regulatory problems. That is, if the Citadel Securities assessment is correct, AT&T may have just proposed a complete merger to see what it can keep, without assessing for itself what should be permissible and what is not under applicable law and regulations. If I'm the regulator, and a significant part of the deal is improper (e.g., more than 40% of the deal), I'd be inclined to decline the whole thing. Let AT&T and T-Mobile come back with a plan that is, at least, in the ball park.
I understand that some people don't like the antitrust laws and other laws and regulations, and it is certainly their right. But if you are working on a deal with major antitrust implications, it seems to me you should be taking those laws and regulations into account in the proposed structure. It's not the regulators' job to tell companies what deal will work; it's the regulators' job to determine whether the deal does work. Unless, of course, you want even bigger, slower government.