Can AT&T Appease DOJ With Reported Leap Deal?
AT&T is in talks to sell off assets to regional wireless provider Leap Wireless as a way to mitigate the government's concerns about the endangered merger with T-Mobile, according to a report in the New York Times.
They are negotiating a way for AT&T to sell it a big piece of T-Mobile's customer accounts and some of its wireless spectrum, "according to people involved in the negotiations," the article says.
The idea of the asset sale is that it will beef up Leap to preserve competition while scaling back how big AT&T becomes after the merger. Bloomberg has also reported that AT&T is planning to roll out a plan for divestitures in hopes of salvaging the merger.
Neither Leap or AT&T responded to questions about the report.
AT&T has said from the day the merger was announced that it expects regulatory clearance could be contingent on divestitures.
Could a big Leap deal be enough to satisfy the Justice Department? Analysts say mollifying Justice with divestitures could be tough.
"We view the odds of reaching an agreeable settlement as quite long, as the government would be looking for some type of deal that would maintain four reasonably strong national wireless carriers. An AT&T deal with T-Mobile, even assuming significant divestitures, would -- at best -- create a weakened fourth national carrier," Christopher King of Stifel Nicolaus wrote in a note to clients last week.
Merger opponent Bert Foer, president of the American Antitrust Institute, said Leap might not be hefty enough to satisfy regulators.
"The question is, can Leap actually make the leap into being a viable replacement for T-Mobile? I come at it as an outsider thinking it's not very likely to succeed," he said.