AT&T to Acquire T-Mobile USA in $39 Billion Merger

By Paul Riegler on 20 March 2011
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AT&T will acquire T-Mobile USA from Deutsche Telekom for $39 billion in cash and stock in one of the largest mergers to be announced since the financial crisis.

The deal has the potential to impact every mobile phone user in the U.S.,  given that the deal dramatically changes the telecommunications landscape in the U.S. by combining the number two and four mobile operators and giving Deutsche Telekom an 8% stake in the combined company and a seat on AT&T’s board.

AT&T has been losing ground since it lost its exclusive on the Apple iPhone recently and Deutsche Telekom has reportedly been disappointed with the performance of its T-Mobile USA unit and had been looking for either an acquisition or merger partner.

“This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation’s future,” said Randall Stephenson, AT&T chairman and chief executive, in a prepared statement. “It will improve network quality, and it will bring advanced LTE capabilities to more than 294 million people.

AT&T has 95.5 million subscribers while T-Mobile, which has run a distant fourth in the market, has 33.7 million.  Once the merger closes, AT&T would be the largest of three mobile operators, followed by Verizon Wireless.  If the merger closes, which is far from certain given the intense regulatory scrutiny that will come out of Washington, Sprint would be a distant third and the pressure may be on for Sprint to find a merger partner.

AT&T and T-Mobile both use the same technology, GSM, which is the norm in most parts of the world.    The merger should alleviate spectrum and capacity shortages which have been cropping up for both, although AT&T’s challenges have been well-documented in media reports since it became evident that smartphone users, especially those of the Apple iPhone, were causing a strain on AT&T’s network.

AT&T also said that it plans to expand its rollout of Long-Term Evolution (LTE), its high-speed wireless technology, as part of the T-Mobile agreement.  AT&T will be able to offer the service to an additional 46.5 million people as part of the deal.  This, in turn, the company pointed out, will help achieve the Federal Communications Commission goal of making broadband more widely available.

T-Mobile is known for the industry’s best customer service and lowest prices, although the latter is likely to change as contracts expire and customers are faced with a choice of only the more expensive AT&T plans.

–Paul Riegler is Technology Editor of Executive Road Warrior.

Accura News

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