March 21, 2011 in Nation/World

AT&T strikes deal for T-Mobile

Purchase would create nation’s largest cellphone company
Peter Svensson Associated Press
 
Cash, stock and more

AT&T would pay about $25 billion in cash to Deutsche Telekom, Germany’s largest phone company, and stock that is equivalent to an 8 percent stake in AT&T. Deutsche Telekom would get one seat on AT&T’s board.

NEW YORK – AT&T Inc. said Sunday it will buy T-Mobile USA from Deutsche Telekom AG in a cash-and-stock deal valued at $39 billion that would make it the largest cellphone company in the U.S.

The deal would reduce the number of wireless carriers with national coverage from four to three, and it’s sure to face close regulatory scrutiny. It also removes a potential partner for Sprint Nextel Corp., the struggling No. 3 carrier, which had been in talks to combine with T-Mobile USA, according to Wall Street Journal reports.

AT&T is now the country’s second-largest wireless carrier and T-Mobile USA is the fourth largest. The acquisition would give AT&T 129 million subscribers, vaulting it past Verizon Wireless’ 102 million. The combined company would serve about 43 percent of U.S. cellphones.

For T-Mobile USA’s 33.7 million subscribers, the news doesn’t immediately change anything. Because of the long regulatory process, AT&T expects the acquisition to take a year to close. But when and if it closes, T-Mobile USA customers would get access to AT&T’s phone line-up, including the iPhone.

The effect of reduced competition in the cellphone industry is harder to fathom. Public interest group Public Knowledge said that eliminating one of the four national phone carriers would be “unthinkable.”

“We know the results of arrangements like this – higher prices, fewer choices, less innovation,” Public Knowledge President Gigi Sohn said in a statement.

T-Mobile has relatively cheap service plans compared with AT&T, particularly when comparing the kind that don’t come with a two-year contract. AT&T CEO Randall Stephenson said one of the goals of the acquisition would be to move T-Mobile customers to smartphones, which have higher monthly fees. AT&T “will look hard” at keeping T-Mobile’s no-contract plans, he said.

AT&T’s general counsel, Wayne Watts, said the cellphone business is “an incredibly competitive market,” with five or more carriers in most major cities. He pointed out that prices have declined in the past decade, even as the industry has consolidated.

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