US mobile operator AT&T announced on Sunday that it will spend USD 39 billion to acquire Deutsche Telekom’s T-Mobile USA (hereinafter referred to as “T-Mobileâ€).
The purchase money will be paid in cash and equity. AT&T and T-Mobile USA were the second and fourth largest mobile operators in the United States. This move will enable AT&T to surpass Verizon Wireless (hereinafter referred to as "Verizon") and become the largest carrier in the United States.
The deal will reduce the number of nationwide mobile operators from 4 to 3, and will surely face severe scrutiny from regulators. On the other hand, the third-ranked Sprint Nextel ("Sprint") will lose a potential partner. Earlier reports said that the company had discussed with T-Mobile about the merger.
The acquisition will bring AT&T users to 129 million, which will account for about 43% of the US mobile market. For T-Mobile's 33.7 million subscribers, the acquisition will not immediately have a material impact. Due to the lengthy approval process, AT&T is expected to take another year to complete the acquisition. After the transaction is completed, T-Mobile will be able to choose AT&T-supplied mobile phones, including the iPhone.
Competition in the mobile market is weakened and its impact is still difficult to measure. The public welfare group Public Knowledge said that it has been “unthinkable†for the four national mobile operators to shrink to three. Gigi Sohn, chairman of the organization, said in a statement: "We know the results of such acquisitions: higher prices, fewer choices, and worse innovation."
Compared with AT&T, T-Mobile's mobile pricing is relatively low. This is especially true when users do not sign a two-year contract. AT&T CEO Randall Stephenson said that one of the goals of the acquisition is to prompt T-Mobile users to switch to smart phones, which will lead to an increase in monthly fees. In addition, AT&T will continue to provide T-Mobile’s contract-free package “with a solemn attitudeâ€.
Wayne Watts, AT&T's general counsel, said the mobile market is an "extremely competitive market," with most major cities having more than five operators. In the past decade, despite the continuous integration of the mobile industry, prices have continued to decline. In a recent transaction, Verizon spent $5.9 billion in 2009 to acquire Alltel, the nation's fifth-largest operator.
AT&T will pay Deutsche Telekom about 25 billion U.S. dollars in cash and 8% of its own shares. In addition, Deutsche Telekom will get a seat on AT&T's board of directors.
Like Sprint, T-Mobile has been struggling with the two giants AT&T and Verizon. In the past three years, although profits have stabilized, the company’s revenue growth has been slow, and the number of users has fallen below 34 million for a long time.
Deutsche Telekom has always expected to take radical steps to get more profit from T-Mobile, the US subsidiary. If T-Mobile merges with Sprint or Verizon, both parties will face the incompatibility of network technologies. But AT&T's underlying technology is the same as T-Mobile, which means that AT&T handsets can use T-Mobile networks, and vice versa.
AT&T said that users will benefit from the added mobile base station and wireless spectrum. This transaction will increase call support capabilities in some locations by 30%. Stephenson said: "This obviously has a significant impact on issues such as disconnection and network performance."
To ease regulatory concerns, AT&T said in a statement on Sunday that it will spend $8 billion to expand ultra high-speed wireless broadband networks in rural areas. AT&T’s previous goal was to cover 80% of the U.S. population with LTE 4G networks, and this target has now been raised to 95%. This means that the company’s 4G network needs to cover an area equivalent to 4.5 Texas. AT&T 4G network will take the lead in some places this summer, but it will take several years to build.
This acquisition has been approved by the board of directors of the two companies. Under the agreement, AT&T can pay up to US$4.2 billion in cash, and reduce the amount of equity payable accordingly, on the premise that Deutsche Telekom will receive at least 5% of the equity.
AT&T said that the transaction has been reached and T-Mobile will not accept any offers from other buyers. AT&T will use the debt and cash deposits to pay for the cash portion of the acquisition and is not expected to borrow from T-Mobile.
The purchase money will be paid in cash and equity. AT&T and T-Mobile USA were the second and fourth largest mobile operators in the United States. This move will enable AT&T to surpass Verizon Wireless (hereinafter referred to as "Verizon") and become the largest carrier in the United States.
The deal will reduce the number of nationwide mobile operators from 4 to 3, and will surely face severe scrutiny from regulators. On the other hand, the third-ranked Sprint Nextel ("Sprint") will lose a potential partner. Earlier reports said that the company had discussed with T-Mobile about the merger.
The acquisition will bring AT&T users to 129 million, which will account for about 43% of the US mobile market. For T-Mobile's 33.7 million subscribers, the acquisition will not immediately have a material impact. Due to the lengthy approval process, AT&T is expected to take another year to complete the acquisition. After the transaction is completed, T-Mobile will be able to choose AT&T-supplied mobile phones, including the iPhone.
Competition in the mobile market is weakened and its impact is still difficult to measure. The public welfare group Public Knowledge said that it has been “unthinkable†for the four national mobile operators to shrink to three. Gigi Sohn, chairman of the organization, said in a statement: "We know the results of such acquisitions: higher prices, fewer choices, and worse innovation."
Compared with AT&T, T-Mobile's mobile pricing is relatively low. This is especially true when users do not sign a two-year contract. AT&T CEO Randall Stephenson said that one of the goals of the acquisition is to prompt T-Mobile users to switch to smart phones, which will lead to an increase in monthly fees. In addition, AT&T will continue to provide T-Mobile’s contract-free package “with a solemn attitudeâ€.
Wayne Watts, AT&T's general counsel, said the mobile market is an "extremely competitive market," with most major cities having more than five operators. In the past decade, despite the continuous integration of the mobile industry, prices have continued to decline. In a recent transaction, Verizon spent $5.9 billion in 2009 to acquire Alltel, the nation's fifth-largest operator.
AT&T will pay Deutsche Telekom about 25 billion U.S. dollars in cash and 8% of its own shares. In addition, Deutsche Telekom will get a seat on AT&T's board of directors.
Like Sprint, T-Mobile has been struggling with the two giants AT&T and Verizon. In the past three years, although profits have stabilized, the company’s revenue growth has been slow, and the number of users has fallen below 34 million for a long time.
Deutsche Telekom has always expected to take radical steps to get more profit from T-Mobile, the US subsidiary. If T-Mobile merges with Sprint or Verizon, both parties will face the incompatibility of network technologies. But AT&T's underlying technology is the same as T-Mobile, which means that AT&T handsets can use T-Mobile networks, and vice versa.
AT&T said that users will benefit from the added mobile base station and wireless spectrum. This transaction will increase call support capabilities in some locations by 30%. Stephenson said: "This obviously has a significant impact on issues such as disconnection and network performance."
To ease regulatory concerns, AT&T said in a statement on Sunday that it will spend $8 billion to expand ultra high-speed wireless broadband networks in rural areas. AT&T’s previous goal was to cover 80% of the U.S. population with LTE 4G networks, and this target has now been raised to 95%. This means that the company’s 4G network needs to cover an area equivalent to 4.5 Texas. AT&T 4G network will take the lead in some places this summer, but it will take several years to build.
This acquisition has been approved by the board of directors of the two companies. Under the agreement, AT&T can pay up to US$4.2 billion in cash, and reduce the amount of equity payable accordingly, on the premise that Deutsche Telekom will receive at least 5% of the equity.
AT&T said that the transaction has been reached and T-Mobile will not accept any offers from other buyers. AT&T will use the debt and cash deposits to pay for the cash portion of the acquisition and is not expected to borrow from T-Mobile.