AT&T has agreed to acquire T-Mobile USA from Deutsche Telekom in a cash-and-stock deal valued at approximately $39 billion.
AT&T operates what is arguably the largest wireless network in the US, with about 95.5 million subscribers, while T-Mobile runs the fourth largest, with 23 million. Both networks are based on the same GSM technology used in most major markets across the rest of the world, and the merger would leave the US with only one GSM provider.
Verizon, which operates the country's second largest network, and Sprint, the third largest provider, use the CDMA standard.
In announcing the deal, AT&T said it would allow the company to bring its planned 4G LTE (Long Term Evolution) network to T-Mobile subscribers. "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 in a canned statement. "It will improve network quality, and it will bring advanced LTE capabilities to more than 294 million people."
That's a theoretical 294 million.
T-Mobile offers HSPA+ technology, a big step beyond 3G – in theoretical throughput, at least – but it has yet to commit to a true 4G network along the lines of AT&T's LTE network. AT&T claimed the deal would answer the call of the Federal Communications Commission (FCC) and President Obama to connect “every part of America to the digital age”.
“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," Stephenson's statement continued. "We are confident in our ability to execute a seamless integration, and with additional spectrum and network capabilities, we can better meet our customers’ current demands, build for the future and help achieve the President’s goals for a high-speed, wirelessly connected America.”
AT&T has agreed to pay Deutsche Telekom $25 billion, and the rest of the $39 purchase price will be paid in common stock. The deal will give Deutsche Telekom a roughly 8 per cent stake in AT&T and a spot on its board of directors.
AT&T has also reserved the right to raise the cash portion of the deal by up to $4.2 billion, if Deutsche Telekon receives at least a 5 per cent equity ownership interested in AT&T.
Prior to AT&T announcing the deal, rumors indicated that Sprint was angling to purchase T-Mobile. ®