(Adds background on breakup fees in previous deals)
By Soyoung Kim
NEW YORK May 18 AT&T Inc has learned its
lesson from its ill-fated $39 billion bid for T-Mobile USA
DirecTV, which has agreed to be acquired by AT&T
for $48.5 billion, will not ask the wireless operator to pay a
reverse break-up fee, or penalty, if regulators reject the
proposed combination, according to people familiar with the
Meanwhile, DirecTV has agreed to pay a $1.4 billion break-up
fee to AT&T, or roughly 3 percent of the deal value, if it ends
the deal to accept a higher bid, the people added, asking not to
be named because the matter is not public.
The companies later confirmed the information on breakup
In 2011, AT&T had to pay $6 billion in cash and assets to
T-Mobile when regulators blocked its planned purchase of the
smaller rival - one of the largest reverse break-up fees on the
Sellers typically demand to be compensated for the sting of
a failed deal if regulators bar a deal on antitrust grounds. But
buyers have grown wary of promising a big antitrust fee in
recent years, in the face of intense regulatory scrutiny and
following AT&T's 2011 experience.
For example, Comcast Corp insisted that its $45
billion bid for Time Warner Cable Inc not include a
reverse break-up fee, in return for agreeing to pay the price
sought by the seller.
DirecTV was comfortable with the absence of such a fee given
that it sees a smooth path to winning antitrust approval, people
familiar with the matter said.
While AT&T and DirecTV may face questions about the areas
where their TV services now overlap, many antitrust experts
expect the proposed combination to ultimately win regulatory
But the proliferation of telecommunications and cable deals
presents regulators with a conundrum as they seek to preserve
The industry, with two mega deals this year, could see
another large attempt at a merger, as Sprint Corp and
T-Mobile discuss a deal that would combine the nation's third
and fourth-largest wireless operators.
The size of a break-up fee, amid anticipation of regulatory
resistance to such a combination, is among several contentious
issues that have complicated the talks.
T-Mobile parent Deutsche Telekom wants a large
break-up fee if regulators block the deal, while Japan's
Softbank Corp < 9984.T> wants the fee to be low to share the
antitrust risk, people familiar with the matter have said.
The $6 billion payment from AT&T following the aborted
merger is widely believed to have helped T-Mobile challenge its
bigger rivals in recent years.
(Reporting by Soyoung Kim, Editing by Bernard Orr)