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AT&T's megablunder payout revealed

Cash? Here's $3bn. Spectrum? Bunches. Roaming? Sure!

Internet Security Threat Report 2014

Details of AT&T's "we screwed the pooch" payout to Deutsche Telekom over the failed T-Mobile USA acquisition have emerged, and right ... about ... now ... AT&T chairman and CEO Randall Stephenson should be barricading himself in his corner office as pitchfork-brandishing shareholders demand his head on a platter.

First off, there's $3bn in cold, hard cash that AT&T will pay to T-Mobile USA's parent by the end of this year – merry Christmas, Deutsche Telekom CEO René Obermann.

T-Mobile USA won't see any of that load-o-lucre, since Deutsche Telekom will use all $3bn to pay down their debt, according to a statement released by the Bonn-based telecommunications giant.

But don't feel too sorry for the now more-mobile T-Mobile USA. Their part of AT&T's parting gift is a hefty chunk of prime-cut Advanced Wireless Services (AWS) spectrum in 128 US market areas, including 12 of the top 20: Atlanta, Baltimore, Boston, Dallas, Denver, Houston, Los Angeles, Phoenix, San Diego, San Francisco, Seattle, and Washington DC.

In addition, T-Mobile will have UTMS roaming rights on AT&T's network for "a term of over seven years," the statement said. According to Deutsche Telekom, this will enable T-Mobile to expand its current coverage area from its current 230 million potential customers to 280 million.

"As a result of the agreement with AT&T," Deutsche Telekom says, "coverage will be extended to many regions of the US in which T-Mobile USA previously had neither its own high-speed mobile communications network nor the associated roaming agreements."

So AT&T is not only out $3bn in cash, it has also strengthened its competition.

It shouldn't be automatically assumed, however, that T-Mobile is going to thrive with its new freedom, spectrum, and roaming agreement. As the country's fourth-place mobile service provider, it's still small potatoes compared to AT&T, Verizon, and Sprint; it's still bleeding customers; and its still going to need investment cash from somewhere if it's going to successfully compete in the 4G future.

And that help may or may not come from Deutsche Telekom. As company spokesman Andreas Fuchs told The New York Times' DealBook blog, "There’s no Plan B. We're back at the starting point."

That said, the Europeans are exiting the AT&T deal with Continental grace. "Deutsche Telekom would like to express its gratitude to AT&T and to Randall Stephenson and his team for the positive cooperation over the past few months," the company wrote in Tuesday's statement.

Positive cooperation is deserving of gratitude, to be sure, but even more gratifying are three billion bucks, a hasty slice of spectrum, and a seven-year-plus roaming agreement. ®

Internet Security Threat Report 2014

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