Deutsche Telekom Looking for $1Billion Breakup Fee if FCC Turns down Sprint Merger

May 12, 2014 - Written By Alexander Maxham

We’ve been hearing a lot about the Sprint/T-Mobile merger lately, and the fact that Sprint’s parent company, Softbank is looking to put down an offer as soon as next month. Now Softbank CEO and Sprint CEO have been trying to lobby those in Washington to allow this deal to go through, but the FCC Chairman, Tom Wheeler doesn’t seem like he’s going to budge. Of course some cash may change that. With that said, Deutsche Telekom, who is T-Mobile’s parent company has been looking to get out of the US for quite some time now. They almost made it out in 2011 when AT&T attempted to purchase the carrier, but the FCC turned it down and T-Mobile gained quite a bit from that deal that fell through, as well as gained some valuable spectrum. T-Mobile made about $3 billion on that deal as well as a long-term 3G roaming agreement with their competitor AT&T.

Deutsche Telekom has said that they aren’t as anxious to get out of the US now since T-Mobile is actually adding a ton of customers and on their way to surpassing Sprint. But the “For Sale” sign is still there. Sprint has been eyeing T-Mobile for nearly 6 months now – that we know of, it is probably longer than that. But the FCC doesn’t want us to drop down to three carriers. And this is why Deutsche Telekom is going after a $1 billion or more breakup fee in case the deal goes south, which it potentially could. Now that’s lower than the AT&T breakup fee was, but that’s still an extra billion that T-Mobile will use to improve their network, which I think is the real reason why they are in talks for a merger.

It’ll be interesting to see this deal when it’s final and heads over to the FCC for approval, what actually happens. I know a lot of people think it’ll be approved, but I’m still on the fence about the FCC approving this deal. Let us know what you think in the comments below.