"Synergy"

AT&T has claimed synergies from buying T-Mobile USA this year, 2011 for an offset purchase price of $39 billion. What worry the FCC is, AT&T has made similar promises with its previous acquisitions, and it isn't clear it has achieved them after since. When AT&T announced the deal of purchasing BellSouth in 2006 with $67 billion, AT&T said it would generate synergies with an annual run rate of $2 billion by 2008, and will rise to $3 billion in 2010. Unfortunately the plan was mainly from cut cost in areas like advertising and staffing. AT&T’s filings show that its total earnings before interest, taxes, depreciation and amortization, or Ebitda, rose by about $2.5 billion at the end of 2006 when the deal was closed, assuming the combination had been in effect all year, and 2008. That means if the synergies were achieved, profits from the organic business were barely up. The same promises has done with the T-Mobile acquisition, AT&T also promised the BellSouth deal would save money on capital expenditures. "It estimated annual savings of $400 million to $500 million in capital expenditures by 2009, off a base of the combined companies’ 2005 capital-expenditure spending of $17.9 billion, about 15% of revenue." (qouted from  Wall Street Journal April, 13 2011) Seeing AT&T’s capital expenditures averaged $18.4 billion between 2007 and 2010, still about 15% of its revenue. During the 2009 economic downturn it has not show a big dip in that saving. Indeed, last year it was $19.53 billion, 15.7% of revenue, and AT&T has projected it will be in the “low to mid-$19 billion range” this year.


Read more about the possibilities of AT&T acquisation of T-Mobile will not succeed.

The FCC Should Put a Stop to the AT&T Merger With T-Mobile

http://benton.org/node/79800