Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Will AT&T's Merger Fight Affect Its Dividend?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Despite the Department of Justice's antitrust lawsuit aimed at stopping AT&T's (NYSE: T  ) proposed merger with T-Mobile, and despite the Federal Communication Commission's staff report all but damning it to a fiery pit, the nation's No. 2 wireless carrier says it is still determined to see the deal through.

The company's chief financial officer, John Stephens, told attendees of the UBS Conference on Global Media yesterday that AT&T would "continue to move forward ... to complete the T-Mobile transaction."

Stephens also wanted to make it quite clear that AT&T had the resources to readily pay for T-Mobile's purchase from its owner Deutsche Telekom. He emphasized that the company had $10 billion in cash on hand, which "is clearly there to prepare us for the T-Mobile closing and to allow us to do that very easily." He also pointed out that the company has access to a "$20 billion bridge facility" and an "$8 billion backup facility that's in place today."

Did I mention our dividend?
Though Stephens wasn't asked about AT&T's dividend, he made sure to bring it up ... twice. The first time was at the end of his prepared statement: "Our dividend record is the envy of the industry. We're the only major telecom company to raise our dividend for 27 consecutive years, and our dividend yield is currently around six percent."

But later, in the second part of his answer to this question: "Could you just talk about the potential uses of that cash [the $10 billion AT&T has on its balance sheet] -- what if the worst case scenario were [to] play out and you were not able to move forward with T-Mobile?"

Stephens gave this somewhat enigmatic response:

Our board decides our dividends and our dividends policy. They're the ones that approve any changes in our dividend payouts, schedules, and amounts ... and we have positioned ourselves very well to be able to act upon that board of directors' decision. Ten billion dollars is a lot of money.

Does that answer indicate that some of that $10 billion would become a windfall dividend for investors, a kind of consolation prize if the deal fizzles away? Is it a signal to soften the blow to shareholders if the T-Mobile merger fails -- which seems more and more likely?

And speaking of that large fourth-quarter charge...
In what could be another attempt to prep the market for the deal's demise, Stephens brought up the bright side of the real possibility of AT&T having to pay Deutsche Telekom a failure-to-complete fee.

"The $4 billion charge is a pre-tax charge ... I certainly expect that it'll be fully deductible ... you guys can do the math on that."

According to The Wall Street Journal, UBS analysts pulled out their calculators and came up with AT&T's fee actually coming to between $1.5 billion and $1.8 billion. Shareholders, feel better?

In answer to a question about why AT&T took that $4 billion charge, Stephens said, "We are going to continue to work with our partner DT, Deutsche Telecom, and work toward a resolution of the transaction. Those conversations, as they occur, if and when they occur ... will be kept confidential ... in hopes to improve the opportunity for the process to be successful."

The italics are mine in the above quote. That "if" only adds to the feeling that AT&T is preparing for a worst-case scenario.

Not giving up yet, it seems
I couldn't blame the company for throwing in the towel. It still has to fight through Sprint Nextel's (NYSE: S  ) warnings that the merger would create a duopoly of AT&T and Verizon (NYSE: VZ  ) , as they would have 80% of the country's wireless subscribers. And its attempts to settle the DOJ lawsuit by offering to offload some of T-Mobile's resources to second-tier carriers such as Leap (Nasdaq: LEAP  ) and MetroPCS (NYSE: PCS  ) have not gone anywhere.

Still, when pressed by the very last questioner at the UBS conference about any fallback plans, Stephens stayed resolute:

Questioner: "Could you give us a better sense of Plan B?"

Stephens: "Our Plan A."

For some other ways to invest in the always-developing mobile landscape, just ask for this special report from The Motley Fool: "3 Hidden Winners of the iPhone, iPad, and Android Revolution." It's free!

Fool contributor Dan Radovsky owns shares of AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 08, 2011, at 9:36 PM, soycapital wrote:

    Go AT&T! Long T and loving the dividend. 15 year shareholder............

  • Report this Comment On December 09, 2011, at 8:28 AM, AdityaJayaram wrote:

    Interesting article on the impact of impending mergers and acquisitions on a companies dividend,Just read an excellent white paper on strategies for successful merger integration

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1738713, ~/Articles/ArticleHandler.aspx, 10/22/2016 6:08:18 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 20 hours ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
T $37.49 Down -1.16 -3.00%
AT and T CAPS Rating: ****
LEAP.DL $0.00 Down +0.00 +0.00%
Leap Wireless Inte… CAPS Rating: *
S $6.55 Down -0.17 -2.53%
Sprint CAPS Rating: **
TMUS $46.75 Down -0.30 -0.64%
T-Mobile US CAPS Rating: ***
VZ $48.20 Down -0.94 -1.91%
Verizon Communicat… CAPS Rating: ****