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AT&T Is Screwed if FCC Rejects T-Mobile Merger

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Either the company knows something we don't, or AT&T sure enjoys a gamble.

Reuters reported that AT&T has promised to give T-Mobile parent Deutsche Telekom $6 billion if the FCC rejects the acquisition -- according to sources familiar with the matter. Clearly, AT&T believed the deal would quickly be rubber-stamped. And although the FCC's track record points to an almost guaranteed approval, the proceedings haven't been going as swimmingly as AT&T would have hoped.

Pending a cancelled merger, AT&T's break-up fee would be $3 billion in cash, $2 billion in spectrum, and $1 billion in roaming privileges. That means, Thomson Reuters Data calculates, that not only would the cash agreement be "unusually high" at 7.7% of the $39 billion deal, the total break-up fee at 15.4% would "break global records."

While a rejected merger could prove costly to AT&T, T-Mobile could sure use the financial support. It's recent quarterly earnings report was pretty dour, with profits dropping $200 million year over year and a loss of 471,000 customers to what the company claimed was "competitive pressures" from Verizon and Sprint.

Should the planets align and T-Mobile isn't snatched up by the worst carrier in the country, maybe Deutsche Telekom could put the money to good use.

(See also: Will AT&T Acquire a Lemon? and FCC Placates Us Before It Approves AT&T, T-Mobile Merger)
POSITION:  No positions in stocks mentioned.