AT&T will buy T-Mobile USA

Sunday, AT&T agreed to buy T-Mobile USA from Germany’s Deutsche Telekom for $39 billion. This is another acquisition in the race to expand and diversify US wireless spectra. The cash-and-stock deal has been approved by the boards of both companies and would make AT&T a dominant player in the US wireless telecom sector, pending regulatory approval.

Randall Stephenson, AT&T chairman and chief executive, said: “This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation’s future.”  He continued “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.”

Deutsche Telekom CEO, René Obermann said “After evaluating strategic options for T-Mobile USA, I am confident that AT&T is the best partner for our customers, shareholders and the mobile broadband ecosystem. Our common network technology makes this a logical combination and provides an efficient path to gaining the spectrum and network assets needed to provide T-Mobile customers with 4G LTE and the best devices. Also, the transaction returns significant value to Deutsche Telekom shareholders and allows us to retain exposure to the U.S. market.”

There were rumours of this buy as far back as 2008. Sprint and Verizon use different technology to run their networks. Most analyst think an acquisition by AT&T would likely run into regulatory hurdles. AT&T and T-mobile have been partners for WiFi at Starbucks since 2008.

T-Mobile USA is the fourth largest network operator in the US, trailing AT&T, Sprint and Verizon wireless, with about 14 percent of the market. Deutsche Telekom has been talking to banks about what to do, and rumours since the first of the year kept saying Germany’s Deutsche Telekom would make a decision about T-mobile USA before May. As part of the transaction, Deutsche Telekom will receive an equity stake in AT&T that, based on the terms of the agreement, would give Deutsche Telekom an ownership interest in AT&T of approximately eight percent. A Deutsche Telekom representative will join the AT&T Board of Directors.

Another major reason for the combination is the compatible enhancement to their respective HSPA + wireless topology. Early last month Ericsson demonstrated three flavors of HSPA (High-Speed Packet Access) with download speeds up to 168Mbps (megabits per second) and 24Mbps on the uplink . As well as the fact both have announced plans for LTE, along with Verizon. Even Sprint and its WiMAX provider Clearwire says they are evaluating LTE. BSN* sees the AT&T & T-mobile USA combo as a way to keep talking about 4G and simply enhance their existing networks. This allows them to wait-n-see which wireless manufacturer’s flavor of LTE works best.

AT&T thinks it can get government approval by pushing on President Obama’s promise of high-speed data to rural communities. Stepehenson added this comment to its press release: “With this transaction, AT&T commits to a significant expansion of robust 4G LTE (Long Term Evolution) deployment to 95 percent of the U.S. population to reach an additional 46.5 million Americans beyond current plans – including rural communities and small towns. This helps achieve the Federal Communications Commission (FCC) and President Obama’s goals to connect “every part of America to the digital age.” T-Mobile USA does not have a clear path to delivering LTE.”

On Friday, Deutsche Telekom AG closed at $13.58 (up $.03 or +0.22 percent) and AT&T closed at $27.94 (up $0.20 or +0.72 percent). TechEye will follow this announcement