(T) AT&T Shedding Assets for T-Mobile

According to a Bloomberg report, AT&T Inc. (T) is seeking to sell some assets or spectrum to rival companies in order to salvage its ambitious $39 billion purchase of Deutsche Telekom’s unit, T-Mobile USA. Earlier in March, AT&T was keen to bring T-Mobile under its fold in a deal that would to be the largest in the wireless industry since 2004.

AT&T affirmed that the sale of assets would minimize the merger concerns like unfair competition, higher prices, job losses, lower innovation and investments in the industry. The move would help the company to gain necessary approvals from the government.

AT&T’s effort to buy T-Mobile is facing a major roadblock, with the Department of Justice (DoJ) filing an antitrust lawsuit to block the deal a month ago. But it isn’t only DoJ that’s opposing the merger; seven other U.S. states and Sprint have also joined the fray.

Nevertheless, a positive response came from the Communications Workers of America, representing more than 700,000 employees in the industry. The union favors the merger as it would create more than 96,000 jobs.

The union sees the deal as a tool for job creation that would improve the current unemployment scenario and revive the U.S. economy. For the very same reason, the CWA also asserted that the U.S. government should support the proposed transaction instead of blocking it.

On the other hand, AT&T is also trying to infuse new life to the blocked deal. The company is arguing that the proposed merger would bring improved wireless services through combined network and development costs.

Divesture talks with several U.S. wireless carriers such as MetroPCS Communications Inc. (PCS), Leap Wireless International Inc. (LEAP), CenturyLink Inc. (CTL), Dish Network Corp. (DISH) and Sprint Nextel Corp. (S) are in preliminary stages. There is no guarantee of completion. Even if AT&T disposes some assets to its rivals, it may still not be able to win the DoJ nod.

Both AT&T and the DoJ are scheduled to meet on February 13, 2012.

While we await the final decision on this much-hyped merger, we prefer to maintain our long-term Neutral recommendation on AT&T. The company retains the Zacks #2 (Buy) Rank for the short term.

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