AT&T has just announced that it is buying struggling T-Mobile USA from Deutsche Telekom AG in a deal that will make it the largest cell phone company in the United States in the number of subscribers.
AT&T is paying approximately $39 billion in cash and stock for T-Mobile USA, who is currently the fourth largest wireless carrier in America. DT will end up owning around 8% of AT&T.
The deal has been approved by the Boards of Directors of both companies, but government regulators will have to sign off on it too, and there’s likely to be considerable scrutiny — if approved, one of the big four carriers is going away and one of the remaining ones is becoming much larger.
T-Mobile currently has 34 million subscribers, but once these are combined with AT&T’s the company will have 129 million. That will make it bigger than Verizon Wireless.
It’s All about the Network
Both AT&T and T-Mobile use the GSM standard, and are working on 4G LTE networks, so combining them is a relatively simple process.
Randall Stephenson, AT&T Chairman and CEO, said, “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, 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.”
With the additional cell towers and wireless spectrum it is acquiring with T-Mobile, AT&T is committing to a significant expansion of its future 4G LTE service. It now believes it will eventually be able to reach 95 percent of the U.S. population.
It was no secret that Deutsche Telekom has been looking for a buyer for some time. There had been reports that T-Mobile and Sprint might merge, bringing together the third and fourth largest U.S. carriers — however, these two use incompatible wireless networks, so a merger wouldn’t be an easy one.