AT&T to acquire T-Mobile USA for $39 billion
In a stunning development that likely surprised many, AT&T announced Sunday that it had entered into an agreement to acquire T-Mobile USA from Deutsche Telekom in an agreement valued at some $39 billion USD. The combined entity would have approximately 130 million subscribers, far surpassing rival Verizon and becoming the nation's largest cellular provider.
AT&T has committed to pay Deutsche Telekom $25 billion in cash, with the remainder being paid in stock according to a statement by the company. The board of directors of both companies have already approved the deal, and it is expected to close within 12 months.
While T-Mobile has long been the subject of speculation regarding some type of possible merger or buyout, AT&T was never mentioned as a possible suitor. Most recently T-Mobile USA had been rumored to be talking with Sprint, although rumors of such a tie up have persisted since September 2009.
The merger was likely one of necessity for Deutsche Telekom's US arm. Spectrum starved and without a clear path to 4G, it was quickly falling behind its larger competitors and had begun to hemorrhage customers. While Sprint would have given the company the spectrum it needed, the differences in technology -- CDMA vs. GSM -- would have made the tie up a potential nightmare.
AT&T and T-Mobile both use GSM. The only differences are the 3G frequencies that each employs: AT&T the 1900MHz band, and T-Mobile 1700 and 2100MHz. Either adding or transitioning to a common frequency would obviously be a much easier path.
"This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation's future," AT&T chairman and CEO Randall Stephenson said. Indeed, as part of the transaction, the carrier committed to bringing 4G LTE to an additional 46.5 million US citizens, which would cover about 95 percent of the population.
Deutsche Telekom chairman and CEO René Obermann said the decision to merge with AT&T came after the company evaluated its options. "Our common network technology makes this a logical combination and provides an efficient path to gaining the spectrum and network assets needed to provide T-Mobile customers with 4G LTE and the best devices," he added.
Obermann added that the merger also helped his company maintain a presence in the US market -- AT&T agreed to give Deutsche Telekom an 8 percent stake in AT&T as well as a seat on the company's board of directors.
Those likely to see the biggest improvement in service are T-Mobile customers. By gaining access to AT&T's expansive network, the service area for those customers would more than double in size alone. AT&T customers would also benefit, gaining additional towers in urban areas -- in some cases increasing cell site density by 30 percent.