AT&T Proposes to Buy T-Mobile for $39 Billion
In a shocking move, AT&T announced that they agree to purchase T-Mobile USA from Deutsche Telekom for a deal of $39 billion in cash and stock. The merger, if approved, will bring AT&T from the second to the top position in the U.S. wireless market.
According to the announcement, T-Mobile will receive $25 billion in cash in addition to $14 billion in the form of AT&T common stock. Deutsche Telekom, parent company of T-Mobile, will also get approximately 8 percent ownership of the combined company. AT&T expects the deal to be approved by the Federal Communications Commission and the US Department of Justice and finalized within a year.
AT&T is currently the second-largest wireless carrier in the U.S. with a base of 96 million subscribers, while T-Mobile, the No.4 provider, has about 34 million customers. After the acquisition, with a total of 130 million subscribers, the new AT&T will overtake current industry leader Verizon Wireless, and will be almost three times the size of Sprint, which is left in a distant third place.
Although the decision came as a shock to most people, it is in fact a logical move for both carriers. AT&T's network can gain extra spectrum capacity from T-Mobile, while T-Mobile will benefit from a network upgrade into 4G LTE, bringing improvement to both networks' quality. Since both of them run on GSM network technology, their compatibility will not be an issue.
On the downside, the acquisition also raises concerns about a monopoly in the U.S. wireless market. Analysts believe that once the two companies are combined, the number of handsets available for selection will most likely be cut down and pricing will be driven up. Some existing T-Mobile customers particularly worry that their current lower-cost plans will disappear under the deal.
Whether customers will be benefited from the merger is still an unknown, but one thing is certain: The industry will witness a great shift in the balance of power.
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