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T-Mobile Statement on AT&T Merger Breakup

T-Mobile Statement on AT&T Merger Breakup

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Published by Carl Franzen
T-Mobile statement on the break-up of its merger with AT&T over opposition from U.S. regulators the FCC and the DOJ.
T-Mobile statement on the break-up of its merger with AT&T over opposition from U.S. regulators the FCC and the DOJ.

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Published by: Carl Franzen on Dec 20, 2011
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12/20/2011

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Bonn, Germany, December 19, 2011
AT&T and Deutsche Telekom terminate agreement on the saleof T-Mobile USA
Deutsche Telekom receives record high break-up fee
AT&T will pay Deutsche Telekom USD 3 billion in cash
T-Mobile USA will receive a large package of Advanced Wireless Solutions(AWS) spectrum and long-term national UMTS roaming agreement
Deutsche Telekom’s guidance and planned dividend policy remainunchanged _______________________________________________________________ U.S. telecommunications company AT&T Inc. and Deutsche Telekom haveterminated the agreement on the sale of T-Mobile USA to AT&T. As a result,AT&T will pay Deutsche Telekom the break-up fee agreed in the contractsigned by both companies dated March 20, 2011. This is one of the highestpayments ever agreed between two companies for the termination of apurchase agreement. It includes a cash payment of USD 3 billion to DeutscheTelekom, which is expected to be made by the end of this year. In addition, itcontains a large package of mobile communications spectrum and a long-termagreement on UMTS roaming within the U.S. for T-Mobile USA.Both companies are in agreement that the broad opposition by the U.S.Department of Justice (DoJ) and the U.S. telecommunications regulator (FCC)is making it increasingly unlikely that the transaction will close. Both companiesare of the opinion that important arguments in support of the transaction havebeen ignored, such as the significant improvement in high-speed mobilenetwork coverage for the U.S. market, as well as the positive employmenteffects. In addition there was no indication that either authority would move
 
 
away from it’s non-supportive stance in return for concessions from the partiesin terms of the scope and structure of the transaction.As part of the break-up fee, T-Mobile USA will receive a large package of AWSmobile spectrum in 128 Cellular Market Areas (CMAs), including 12 of the top20 markets (Los Angeles, Dallas, Houston, Atlanta, Washington, Boston, SanFrancisco, Phoenix, San Diego, Denver, Baltimore and Seattle).The UMTS roaming agreement for the U.S. in T-Mobile USA’s favor has a termof over seven years and will allow the company to improve its footprintsignificantly among the U.S. population and offer its customers better broadband coverage for mobile communications services in the future.Population coverage will increase from 230 million potential customers atpresent to 280 million. As a result of the agreement with AT&T, coverage will beextended to many regions of the U.S. in which T-Mobile USA previously hadneither its own high-speed mobile communications network nor the associatedroaming agreements.The termination of the agreement means Deutsche Telekom will go back toreporting T-Mobile USA as continuing operations in future. Deutsche Telekom'sguidance for the 2011 financial year remains unchanged as a result of thisdevelopment, with adjusted EBITDA of around EUR 19.1 billion expected. AtEUR 6.5 billion, free cash flow is forecasted to remain at the prior-year level or increase slightly. The guidance includes the T-Mobile USA contribution basedon the average exchange rate in 2010 of USD 1.33 per euro. The free cash flowforecast does not include the settlement payment of EUR 0.4 billion relating toPTC in Poland or the cash payment of USD 3 billion from the break-up fee to bepaid by AT&T.Deutsche Telekom’s dividend policy also remains unchanged. The annualdividend payments are subject to the necessary board resolutions and other legal requirements.
 
 
Even following the termination of the agreement with AT&T, Deutsche Telekomexepects to remain within the communicated ranges for certain financialperformance indicators used to assess the financial performance of thecompany. These are as follows: The ratio of net debt to adjusted EBITDA of theGroup is to be between 2 and 2.5, the equity ratio is to be between 25 percentand 35 percent, gearing (ratio of net debt to shareholders' equity) between 0.8and 1.2, and liquidity reserves is to cover maturities of at least the next 24months.The cash component of the break-up fee directly reduces Deutsche Telekom’snet debt, thereby by strengthening the financial performance indicators affectingthe company’s rating.Deutsche Telekom would like to express its gratitude to AT&T and to RandallStephenson and his team for the positive cooperation over the past fewmonths. Our working relationship was characterized by fairness and respect atall times.
Disclaimer:
To the extent that this media information contains any statements that relate to expectations,forecasts or to the future, these statements may be associated with known and unknown risksand uncertainties. Therefore, the actual events and circumstances may differ materially fromthese statements. Subject to mandatory provisions of law, the company has no obligation andundertakes no obligation to publicly update or revise any of these statements to correctlyreflect, subsequently to this release, the actual events and circumstances.
 
Deutsche Telekom AG
Corporate Communications
Tel.:
+49 228 181 – 4949
E-Mail:

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