AT&T to buy T-Mobile USA for $39 billion

21st March 2011, Comments 0 comments

AT&T staked a claim to become the United States' biggest cellphone provider Sunday, announcing a $39 billion deal to buy rival T-Mobile USA.

In what would be one of the largest US corporate takeovers in years, AT&T looked to snap up the US unit of Germany's Deutsche Telekom, netting 34 million more subscribers and securing nearly 40 percent of the market.

The deal would see currently second-ranked AT&T leapfrog its arch-rival Verizon -- transforming the lucrative US telecoms industry and sending ripples through the advertising, commercial real estate and a host of other sectors.

AT&T said the deal would help boost US infrastructure and improve network quality.

"This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation's future," said Randall Stephenson, AT&T chairman and chief executive.

But the high-profile takeover is likely to draw careful scrutiny from regulators, who oversee an already highly consolidated sector.

According to comScore, AT&T accounted for around 27 percent of US mobile subscribers in December 2010, while T-Mobile held 12 percent.

Verizon, meanwhile, accounted for 31 percent and the much smaller Sprint held 12 percent.

Consumer group Public Knowledge described the deal as "unthinkable."

"We know the results of arrangements like this -- higher prices, fewer choices, less innovation," said the group's president Gigi Sohn.

"The fact that AT&T and T-Mobile would even think of such a combination shows how desperately the US needs both strong network neutrality rules and a competition policy that requires dominant broadband providers to make their networks available to competitors."

AT&T has frequently been lambasted by consumer groups for poor service, earning it last place in influential Consumer Reports ratings for providers.

Democratic Senator Jay Rockefeller, who chairs the Senate commerce committee, said watchdogs should "leave no stone unturned in reviewing (the deal)."

"It is absolutely essential that both the Department of Justice and the FCC (Federal Communications Commission) leave no stone unturned in determining what the impact of this combination is on the American people."

But Forrester Research analyst Charles Golvin said the deal would improve the quality and coverage of high-speed mobile broadband, including, in the long run, in rural communities.

"The bad news: the cost of that service won't come down nearly as fast as customers would like, since AT&T and Verizon Wireless combined would own nearly three out of every four wireless subscriptions in the US," he said.

"While clearly troublesome for Sprint and other smaller mobile competitors, it's also bad news for cable operators, whose incipient mobility products will suffer in comparison to what AT&T and Verizon can offer."

The takeover will give AT&T a big boost in its rivalry with Verizon, which recently started selling the Apple iPhone with an end to the AT&T monopoly.

Analysts said the deal also helps AT&T in the so-called 4G sector offering more advanced wireless services.

"AT&T has been under attack for not being able to match the network capacity of larger rival Verizon," said MG Siegler of the technology blog TechCrunch.

"And when they won the majority of the bids for the open spectrum in 2008, Verizon also had a clear path to the future. Now AT&T is taking another path: buying T-Mobile."

The cash-and-stock deal would lift AT&T's annual wireless revenues by around 37 percent to $80 billion.

But it could also spell job losses for some AT&T or T-Mobile staff as the two firms move to reduce duplication, including the possible sale of retail outlets and the squeezing of advertising budgets.

Verizon and AT&T are the largest online display advertisers in the United States according to comScore.

Meanwhile struggling Sprint could be forced to look to Verizon or others as a possible partner. Both companies use CDMA technology. T-Mobile and AT&T both use the globally popular GSM system.

For T-Mobile's parent firm Deutsche Telekom, the sale would spell the end of a foray into the US market.

For years T-Mobile was Deutsche Telekom's main growth-driver but in recent years a string of poor results gave rise to speculation that it wanted to put an end to its US adventure.

Deutsche Telekom's flamboyant former boss Ron Sommer bought Voicestream more than a decade ago at the height of the dotcom boom, re-branding it T-Mobile, but leaving the German firm struggling under a mountain of debt.

"This is a very very valuable deal for Deutsche Telekom. This is a good day," chief executive Rene Obermann said. "The proceeds will give us the financial firepower to finance our expansion plans in Europe."

Deutsche Telekom will get $25 billion in cash and $14 billion worth of shares, making the German firm AT&T's biggest minority shareholder with an eight-percent stake and a seat on the board, based on the current share price.


© 2011 AFP

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