AT&T mulls divesting $8B in properties, T-Mobile P.R. could fetch $300M-$500M if sold

Written by  //  August 16, 2011  //  Telecommunications/Technology  //  No comments

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AT&T's stateside parent could opt to divest the local T-Mobile operation. (Credit: Carlos Anguita)

It has been nearly a month since the Federal Communications Commission stopped the clock on its 180-day timeline to approve the proposed $39 billion AT&T acquisition of rival T-Mobile.

Several major developments have taken place since the agency halted the proceedings July 20, including AT&T’s recent decision to hire Bank of America Merrill Lynch to steer it through the process of divesting $8 billion or more in assets, as it works to gain approval of the mega-merger from the FCC and other regulatory agencies.

In a letter that mistakenly — and briefly — appeared on the FCC’s website and picked up by a number of stateside media outlets, AT&T’s attorneys told the federal agency the carrier’s plans were to either choose to divest some of its own properties, or those belonging to T-Mobile, after the merger is completed.

“As we said on the day we announced the merger with T-Mobile USA, we anticipate there will be some divestitures, as we have had in past mergers, but any speculation about the amount of divestitures is premature,” a company representative told the Wall Street Journal, one of the publications that obtained a copy of the letter posted last week.

In an interesting twist, in the letter AT&T reportedly admitted that to achieve its goal of covering 97 percent of its footprint with a next-generation digital platform known as LTE, it would need to invest about $3.8 billion — or about 10 times less than it would through the T-Mobile buyout.

However, some industry experts suggest that the company would be hard-pressed to expand into rural areas of the U.S. mainland without T-Mobile’s network. Still others say AT&T made the move for T-Mobile to keep competitors such as Sprint from picking up the property and getting a better foothold on the market.

P.R. divestiture not improbable
While no specifics of the possible divestitures have been released, it would not be unlikely if the carrier decided to sell the T-Mobile property in Puerto Rico, where rumblings of the possibility that the deal would create a monopoly have swirled since the transaction was announced in March. Shortly after AT&T announced its intentions, the local Telecommunications Regulatory Board said it would oppose the deal.

T-Mobile is Puerto Rico's third-largest wireless carrier. (Credit: © Mauricio Pascual)

T-Mobile is the third largest player on the island, with an estimated 500,000 customers. That figure, added to AT&T’s estimated 900,000 clients, would give the buying carrier about 55 percent of the local wireless market — something regulators could see as monopolistic, despite the presence of competitors Claro, Sprint PCS and Open Mobile.

While T-Mobile has proven itself to be a good competitor, there are several issues affecting the value of its operations, which News is my Business learned could fluctuate between $300 million and $500 million.

First, there is the matter of whether T-Mobile would be able to compete on its own after the transaction, given that it is heavily dependent on its stateside parent, T-Mobile USA, for “behind-the-scenes” elements such as network and operational systems and investments.

Furthermore, the transaction is taking place during a time when the Puerto Rico market is not considered “prime,” as it was back in the late 1990s, or early 2000s, an industry source said.

“I would suspect that if AT&T is forced to carve out [T-Mobile] Puerto Rico, Claro would be given the opportunity to acquire whatever is carved out from a frequency and subscriber perspective. If this happens Claro will acquire whatever is offered,” the source familiar with the island’s telecom industry said on the condition of anonymity.

“Puerto Rico is not an attractive market for the very few top-tier players left. The options for new entrants are very limited,” the source said. “The only ones that may have a strategic reason are Telefónica, Trilogy International, which owns VIVA in the Dominican Republic, and Digicel. I don’t see Verizon in this playing field.”

PR consumers voice concerns to FCC
Over the past week, the FCC has received a slew of comments from the public and concerned industry representatives, who submitted their opinions online.

Among them were three local consumers — Ileana Rodríguez from Guayanilla, Ian Menéndez from Cabo Rojo and Thomas A. Rivera from Orocovis — who expressed their opposition against the proposed merger.

On the online docket, they separately posted the same message: “AT&T’s takeover of T-Mobile would stifle choice and innovation in the market, harm consumers, and lead to higher prices and fewer jobs nationwide. Don’t let AT&T put our mobile future at risk. Please stand with me and reject such reckless consolidation of the mobile industry.”

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