AT&T Wireless settles suit over TeleCorp acquisition

WILMINGTON, Del. — AT&T Wireless Services agreed with other defendants to pay $47.5 million to settle a suit claiming it shortchanged investors when it bought TeleCorp PCS.

AT&T Wireless and eight former TeleCorp executives agreed to pay the money to avoid a trial in Delaware Chancery Court in Wilmington, according to court papers. About a dozen TeleCorp shareholders said in the suit that the Redmond-based wireless company secretly paid TeleCorp officials $140 million last year to win support for the $4.6 billion buyout.

John Maxwell, an analyst at Waddell & Reed Financial — which owns AT&T Wireless shares — said the settlement was a good one for unhappy TeleCorp shareholders. "They should be happy they are getting about $50 million," he said.

The settlement comes as AT&T Wireless completed a buyback of $540.4 million in high-interest debt it had assumed in the acquisition of TeleCorp and another company. The buyback included $331.2 million of TeleCorp Wireless notes and $209.2 million of Tritel PCS notes. The company assumed $2.5 billion in debt in the TeleCorp buyout.

AT&T Wireless officials declined to comment on the settlement. AT&T Wireless denied in court papers that it had done anything wrong and said it had settled the case to "avoid the substantial expense, inconvenience, risk and distraction of continued litigation."

In a February 2002 acquisition, AT&T Wireless bought the 77 percent of TeleCorp it didn't already own in exchange for stock and assumed debt. TeleCorp was AT&T Wireless' largest U.S. affiliate, with licenses to provide service to more than 37 million people.

In their lawsuits, TeleCorp investors questioned whether the wireless company's executives extracted a high-enough price for their shares because of their conflicting interests in the buyout.

They said AT&T Wireless paid TeleCorp Chief Executive Gerald Vento and Chief Financial Officer Thomas Sullivan $140 million for their interests in wireless-airwave licenses.

Those so-called "side deals" were never disclosed to shareholders even after the company's chairman inquired about them, the suits said.

Lawyers for Vento and Sullivan weren't immediately available to comment on the allegations or the settlement.

TeleCorp shareholders had sought more than $300 million in damages over executives' actions in connection with the buyout, according to court papers.