AT&T announced on Sunday that it agreed to buy T-Mobile USA from Deutsche Telekom, in a $39 billion deal that will reshape the cellular telephone industry.
The merger â€” one of the largest since the onset of the financial crisis â€” would combine the second and fourth largest cellular carriers in the nation, bringing together AT&Tâ€™s 95.5 million wireless subscribers with T-Mobileâ€™s 33.7 million customers.
The transaction, which requires approval from regulators, is expected to be heavily scrutinized in Washington. The deal would leave only three major cellular carriers in the nation: AT&T, Verizon and a much smaller Sprint, which may now be forced to find a merger partner.
Already, some critics say the deal will result in higher prices for consumers. T-Mobile had offered some of the lowest rates in the county. While AT&T is expected to honor current T-Mobile contracts, it is likely that once those contracts expire, T-Mobile customers would be expected to pay AT&Tâ€™s higher rates.
Even so, AT&Tâ€™s bid will solve the problem facing T-Mobile USA, the smallest of the countryâ€™s four major cellphone service providers. Both companies operate on the same wireless standard, GSM. Through the deal, T-Mobile will finally gain a path for the next generation of cellphone data, known as 4G, by using AT&Tâ€™s forthcoming LTE standard.
â€œThis transaction represents a major commitment to strengthen and expand critical infrastructure for our nationâ€™s future,â€ said Randall Stephenson, AT&T â€™s chairman and chief executive, said in a statement.
The deal will also drive enormous cost savings. The combined company is expected to shutter retail outlets in areas where they overlap as well eliminate overlapping back office, technical and call center staff. Marketing costs could also be cut. Cellular carriers have been one of the biggest advertising spenders in the nation.
AT&T was advised by Greenhill & Company, JPMorgan Chase and Evercore Partners, as well as the law firms Sullivan & Cromwell, Arnold & Porter, and Crowell & Moring. Deutsche Telekom was advised by Morgan Stanley.