T-Mobile US (NYSE:TMUS) parent Deutsche Telekom wants at least a $1 billion breakup fee in the event that regulators block a merger between Sprint (NYSE: S) and T-Mobile, according to a Wall Street Journal report.

According to the report, which cited unnamed sources, DT also wants assurances that T-Mobile's brand and some of its management team would remain after a deal.

The report also said DT and SoftBank-owned Sprint are discussing how much opposition they face from regulators. The companies want to strike a deal soon, but given signals of opposition from the FCC and Department of Justice, they are also thinking of holding off on the transaction until after the incentive auctions of 600 MHz broadcast TV spectrum scheduled for mid-2015.

DT and SoftBank are also evaluating how FCC rule changes governing how much spectrum carriers can hold could affect the merger of Sprint and T-Mobile. On Thursday, the FCC plans to vote on rules that would limit the amount of spectrum carriers can own. The new rules could add the 2.5 GHz spectrum that Sprint owns to the FCC's so-called "spectrum screen"--thus making it more difficult for Sprint to acquire additional spectrum. The addition of Sprint's 2.5 GHz spectrum to the screen could make it more difficult for Sprint to merge with T-Mobile and to combine the two carriers' spectrum portfolios.

DT received a $6 billion breakup fee that included spectrum, a roaming agreement and $3 billion in cash after regulators blocked AT&T's (NYSE: T) $39 billion acquisition of T-Mobile in 2011. That set the stage for T-Mobile's comeback in the market; the carrier has added 6.1 million customers in the past four quarters, including 1.3 million postpaid subscribers in the first quarter of 2014 alone. DT still owns 67 percent of T-Mobile.

DT CEO Timotheus Hoettges said last week he is open to creating a "super maverick" to challenge AT&T and Verizon Wireless (NYSE: VZ). However, he also indicated that there are clear hurdles. "We're getting signals from the regulatory authority as well as antitrust supervisors that such a merger isn't seen as expedient," Hoettges said in discussing DT's first-quarter results. "Against that backdrop, we have to see how we can develop the business so it creates the most value for our shareholders."

The Journal report added that SoftBank CEO and Sprint Chairman Masayoshi Son wouldn't do anything "reckless," and does not want the deal to get blocked only to see T-Mobile get a sizable breakup fee, which it could then use to fight Sprint.

For more:

- see this WSJ article (sub. req.)

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