AT&T Buying T-Mobile For $39 Billion

AT&T on Sunday announced that it would acquire T-Mobile from Deutsche Telekom in a $39 billion deal that will create the largest wireless carrier in the U.S. Almost immediately, AT&T started its campaign to get the deal approved by regulators. According to a report by Bloomberg News, AT&T had been in talks for sometime with T-Mobile's parent company, Deutsche Telekom, and won because it was willing to offer a higher cash component to the purchase price. AT&T was also willing to offer a higher than average breakup fee if the sale is cancelled, possibly due to regulatory requirements making it undesirable to complete on the deal.

T-Mobile and Sprint have been rumored to merge. Indeed, Sprint will need a merger partner and Verizon Wireless may be a potential option. That move would create a U.S. wireless duopoly with a bevy of smaller players. Verizon is planning to upgrade its entire nationwide network to LTE by the end of 2013. This unexpected AT&T/T-Mobile tie-up could have the effect of accelerating the 4G race in the US, which would make the American 4G networks some of the best on the planet. 

In a statement, AT&T CEO Randall Stephenson positioned the deal this way. 

"It will improve network quality, and it will bring advanced LTE capabilities to more than 294 million people. Mobile broadband networks drive economic opportunity everywhere, and they enable the expanding high-tech ecosystem that includes device makers, cloud and content providers, app developers, customers, and more…This transaction delivers significant customer, shareowner and public benefits that are available at this level only from the combination of these two companies with complementary network technologies, spectrum positions and operations. We are confident in our ability to execute a seamless integration, and with additional spectrum and network capabilities"

Stephenson also played to President Obama’s goals for nationwide mobile broadband.

Indeed, Sprint spokesman John Taylor already made it clear where his company stands:

"The combination of AT&T and T-Mobile USA, if approved by the Department of Justice (DOJ) and Federal Communications Commission (FCC), would alter dramatically the structure of the communications industry. AT&T and Verizon are already by far the largest wireless providers. A combined AT&T and T-Mobile would be almost three times the size of Sprint, the third largest wireless competitor. If approved, the merger would result in a wireless industry dominated overwhelmingly by two vertically-integrated companies that control almost 80% of the US wireless post-paid market, as well as the availability and price of key inputs such as backhaul and access needed by other wireless companies to compete. The DOJ and the FCC must decide if this transaction is in the best interest of consumers and the US economy overall, and determine if innovation and robust competition would be impacted adversely and by this dramatic change in the structure of the industry"

Key Notes:

• AT&T will pay $25 billion in cash with the rest in stock.
• Deutsche Telekom will own about 8 percent of AT&T when the deal is done.
• AT&T’s purchase of T-Mobile is a spectrum play.
• AT&T estimated that it would take five years to build out its network density to what T-Mobile and AT&T have today.

For more information on the transaction, including background information and factsheets, visit www.MobilizeEverything.com.