The delay of the US Justice Department’s antitrust trial related to AT&T’s proposed, but increasingly-vulnerable, US$39 billion merger with T-Mobile USA, could increase risk for shareholders, according to global ratings agency Fitch Ratings.
”If antitrust challenges prove too great and the acquisition is scrapped, we feel event risk for bondholders could remain high,” a Fitch statement said. The agency added that without the benefits of the merger, AT&T could increase company stock buybacks “beyond moderate levels.”
Fitch is also concerned about the break-up fees AT&T would incur should the merger fail – believed to be around US$4 billion – as well as uncertainty around AT&T’s next steps to acquire spectrum. “AT&T's need to enhance its capacity could lead to a rise in capital spending and/or the acquisition of spectrum through other transactions,” the statement said.
As for T-Mobile USA, Fitch believes the US number four operator will struggle due to a lack of spectrum suitable for LTE. “If the deal falls through, we believe it would be increasingly difficult for T-Mobile to be independently viable and competitive with AT&T, Verizon, or Sprint,” Fitch stated.
AT&T requested a delay in the antitrust case earlier this week to allow the two operators to “evaluate all options,” while the US number two operator withdrew its acquisition application from the Federal Communications Commission (FCC) in November. The US Justice Department, as well as operators Sprint Nextel and Cellular South, oppose the deal while the FCC referred the merger proposal for a hearing with an agency judge.