US government blocks T-Mobile sale
The Local · 1 Sep 2011, 11:49
Published: 01 Sep 2011 11:49 GMT+02:00
- Deutsche Telekom Q2 profit plunges (04 Aug 11)
- Telekom reportedly mulling massive job cuts (01 Aug 11)
- Super-fast mobile internet set to expand (01 Jun 11)
The US government justified the move Wednesday on the grounds that the $39-billion deal would "substantially" reduce competition in the mobile phone network market. Deutsche Telekom's shares fell by 7.6 percent when the news broke.
Telekom faces serious problems if the deal falls through. Company boss René Obermann would be forced to look for a new buyer in the US, and is unlikely to get such a high price again.
Deutsche Telekom announced its intention to sell T-Mobile in March. The subsidiary had suffered from falling turnover, and had been relegated to fourth biggest mobile network in the US.
But politicians and consumer protection agencies have heavily criticized the proposed deal, and US authorities have spent months deliberating its legitimacy.
The sale would mean AT&T had a total of 120 million customers and a 39 percent market share in the US. Regulators fear that would create a duopoly - together with market leader Verizon - covering 76 percent of the market.
Deutsche Telekom is left with three options should the deal collapse: find a new buyer, merge with the third biggest US mobile phone company Sprint, or try to complete a new deal with internet provider Clearwire or a cable network company.
The Justice Department's decision represents the biggest blow in Obermann's glittering career.
T-Mobile's poor performance has been dragging down Deutsche Telekom's share value for months. On top of that, the company had been counting on the money to extend its fibre-optic network in Germany and to pay off some of its debts.
AT&T announced Wednesday that it was appealing against the decision and would do all it could to save the deal.