ATAD21 Mar 2011 09:19
AT&T to buy T-Mobile for $39bn
Date: Monday 21 Mar 2011
LONDON (ShareCast) - AT&T is to pay $39bn for Deutsche Telekom's T-Mobile USA to create a new US mobile phone powerhouse.
AT&T is the US’s second largest US mobile group behind Verizon, but a tie-up with T-Mobile would add 34m customers and give it a combined market share 43% against Verizon’s 35%.
Analysts said the price is high, but underlined AT&T’s desperation to cement its place in the fast growing data, video and apps market.
The US firm has also taken a huge bet on getting the deal through US regulators by agreeing to pay the German firm $3bn through a break clause if it is knocked back on competition grounds.
Deutsche Telekom will take an 8% stake in AT&T as part of the deal and receive at least $25bn cash to pay down its debt pile.
Getting it approved, though, will not be easy. Rival mobile group Sprint has already launched a complaint, saying the US market would now be dominated by two companies that have almost 80% of US wireless contract customers.
Consumer group are also worried about the impact on prices. T-Mobile USA is one the US’s cheapest suppliers.
US Senator Herb Kohl, chairman of the Senate Antitrust, Competition Policy and Consumer Rights Subcommittee, said his panel will take a close look at what a "loss of competition will mean for people who increasingly rely on wireless phone service to connect to friends, family and the Internet."
AT&T and T-Mobile USA use compatible mobile systems and both intend to switch to LTE, a fourth-generation technology, that is set to be the new industry standard. Cost savings of $3bn are forecast from the deal in three years.