AT&T Inc. (T) announced plans to acquire T-Mobile USA Inc. in a $39 billion deal that if approved will create the domestic industry’s largest player – by a sizeable margin – with more than 120 million wireless customers. AT&T Mobility is currently the nation’s second-largest operator with more than 95.5 million “connections,” just behind current No. 1 Verizon Wireless with 102.2 million “connections.” T-Mobile USA is currently a distant No. 4 with approximately 33 million subscribers.
The news would seem to puts to rest recent rumors about a possible tie-up between No. 3 operator Sprint Nextel Corp. or its majority-owned partner, Clearwire Corp., and T-Mobile USA.
The purchase, which has been approved by both boards of directors, will give T-Mobile USA’s parent Deutsche Telekom AG (DTEGY) an 8% interest in AT&T.
Perhaps fearing that the Department of Justice or the Federal Communications Commission – both of which have to approve the deal – may find the merger anticompetitive, or force the companies to divest some assets in markets where the government feels there is too much concentration, which happened when Verizon Wireless bought Alltel Wireless Communications L.L.C., the press release announcing the proposed deal takes special notice of how the combined operations would benefit President Barack Obama’s National Broadband Plan.
“With this transaction, AT&T commits to a significant expansion of robust 4G LTE (Long Term Evolution) deployment to 95% of the U.S. population to reach an additional 46.5 million Americans beyond current plans – including rural communities and small towns,” the company said in the press release. “This helps achieve the Federal Communications Commission and President Obama’s goals to connect ‘every part of America to the digital age.’”
AT&T Chairman and CEO Randall Stephenson continued: “This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation’s future. 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. During the past few years, America’s high-tech industry has delivered innovation at unprecedented speed, and this combination will accelerate its continued growth.”
Both AT&T Mobility and T-Mobile USA have tapped LTE as their eventual next-generation network migration, though they have also pushed the “4G” tag with their current HSPA+ services. T-Mobile USA has been hamstrung with its LTE plans due to a lack of spectrum, while AT&T Mobility has been very aggressive in acquiring spectrum assets in the 700 MHz and 1.7/2.1 GHz band to support its LTE plans. AT&T Mobility has said it plans to begin rolling out LTE services later this year.
AT&T has not been considered a strong player for T-Mobile USA due to regulatory concerns despite the network technology similarities. Instead, most recent talk has been around a possible tie-up between Sprint Nextel and T-Mobile USA. Both carriers have struggled to compete against their larger rivals and despite the current network technology incompatibility, both have talked about eventual migration to the LTE standard.
AT&T Mobility had been the nation’s largest operator until Verizon Wireless bought Alltel for $28 million. As part of that deal, Verizon Wireless had to divest spectrum assets in 105 markets.
The consolidation puts even more pressure on Sprint Nextel and Clearwire over the current tension between the companies regarding a pricing dispute as well as their plans for expanding Clearwire’s current WiMAX network.