Stumbling stock markets no obstacle for AT&T deal

John Dimsdale Aug 16, 2011
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Stumbling stock markets no obstacle for AT&T deal

John Dimsdale Aug 16, 2011
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STEVE CHIOTAKIS: Google’s $12.5 billion offer to buy Motorola’s cell phone making business is just one of a flurry of recent mergers and acquisitions. Remember AT&T buying rival T-Mobile? Well that huge telecom buyout still needs government approval.

From Washington, Marketplace’s John Dimsdale reports now on whether the latest economic turmoil has changed the financial outlook of that deal.


John Dimsdale: AT&T has maxed out its cell phone capacity thanks to millions of new smartphone customers. To expand, it needs T-Mobile’s wireless network and is willing to pay a hefty price for it.

Telecom analyst Jeff Kagan says the stock market roller coaster hasn’t changed that.

Jeff Kagan: AT&T has to improve the quality of service for their iPhone customers, and their Android customers, so they don’t keep on getting all the bad publicity and all the complaints. So this is a problem AT&T faces and AT&T has to do this deal one way or another.

AT&T is borrowing most of the money to buy T-Mobile.

S&P Equity Research analyst Todd Rosenbluth says as long as interest rates stay low…

Todd Rosenbluth: We still think AT&T will get favorable terms to borrow to support the deal.

Europe’s debt problems are also feeding the financial incentives to merge.

Tech expert Scott Cleland with Precursor LLC says T-Mobile’s current owner, Germany’s Deutsche Telekom, is desperate to sell.

Scott Cleland: They need all the capital they can muster in Germany because they are the lender of last resort for the whole EU, including the troubled Greece, Portugal, Spain and Italy.

Cleland says between Deutsche Telekom’s desperation for cash and AT&T’s need for extra cell phone capacity, the two companies are willing to do just about anything the government asks to get regulatory approval for T-Mobile’s sale.

In Washington, I’m John Dimsdale for Marketplace.

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