AT&T must pay a hefty break-up fee to Deutsche Telekom, the owner of T-Mobile USA, the German company said. Last week, the U.S. Justice Department filed to block the $39 billion deal.
Deutsche Telekom responded to an earlier report by Reuters that said the fee might be avoided.
Under terms of its agreement, Deutsche Telekom would be entitled to a $3 billion cash payment plus spectrum and services valued around another $3 billion.
Citing a source familiar with the contract, Reuters said the fee would only be paid if certain conditions were met. One is that the merger receive regulatory approval within a specific time frame. But a Deutsche Telekom official said that's exactly why the breakup fee was negotiated.
Julius Genachowski, chairman of the U.S. Federal Communications Commission, has also opposed the AT&T/T-Mobile merger.
Another condition is that the value of T-Mobile USA, based in Bellevue, Wash., not fall below a specific level, Reuters reported. Deutsche Telekom shares have dropped about 16 percent in the past month. In Germany, they rose 0.2 percent Tuesday.
Deutsche Telekom representatives said the company is evaluating options to facilitate the sale of the No. 4 U.S. wireless carrier to Dallas-based AT&T, which is No. 2. AT&T officials have said they will explore options that might win Justice Department approval.
Break-up fees are a kind of iron handcuff to ensure a deal goes through and to ward off a potential counter-bidder. Deutsche Telekom's financial advisers are Morgan Stanley, Deutsche Bank, Credit Suisse and Citigroup, which all stand to collect big fees.
U.S. District Judge Ellen S. Huvelle in Washington has been assigned to the AT&T/T-Mobile case.