AT&T Inc. and Deutsche Telekom AG announced Sunday that they have entered into a definitive agreement under which AT&T will acquire T-Mobile USA from Deutsche Telekom in a cash-and-stock transaction currently valued at approximately $39 billion. The agreement has been approved by the Boards of Directors of both companies. AT&T was unavailable for comment.
The announcement came at the beginning of the CTIA Wireless conference this week in Orlando, Florida. Despite the significance of the announcement, few participants have been willing or able to comment. One attendee called it "the biggest news that nobody is talking about."
Michael Howard, Co-founder and Principal Analyst at Infonetics Research called the acquisition "almost inevitable" and pointed out that the activity is typical of most markets. Other attendees pointed to the regulatory battle that AT&T may have ahead of them.
A representative of AT&T competitor Sprint declined to comment, but pointed towards the comments of Sprint CEO Dan Hesse from the Tuesday CTIA keynote session. Hesse Tuesday expressed concerns that with major market share belonging to AT&T and Verizon, "too much power" would be left in the hands of just two companies.
AT&T's acquisition of T-Mobile USA provides a combination of network assets to add capacity sooner than any alternative, and it provides an opportunity to improve network quality in the near term for both companies' customers. In addition, it provides a solution to the impending exhaustion of wireless spectrum in some markets, which limits both companies' ability to meet the ongoing explosive demand for mobile broadband.
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.
"This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation's future," said Randall Stephenson, AT&T Chairman and CEO. "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."
Stephenson continued, "This transaction delivers significant customer, share owner 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 Chairman and 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."
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 8 percent. A Deutsche Telekom representative will join the AT&T Board of Directors.
AT&T Inc. hosted a live video and audio webcast Monday regarding its announcement to acquire T-Mobile USA. The webcast will be available for replay on AT&T's Investor Relations website after March 21, 2011, starting at 12:30 p.m. ET through April 21, 2011. An archive of the conference call will also be available during this time period. The recording can be accessed by dialing +1 (877) 870-5176 within the U.S. or +1 (858) 384-5517 outside the U.S. and entering reservation code 29362481#.
T-Mobile posted a Q&A on its website to address the concerns of T-Mobile's customers.
More information on the transaction, including background information and factsheets, is available at www.MobilizeEverything.com.
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