AT&T buys T-Mobile in blockbuster wireless deal
The race to deliver 4G mobile broadband services in the U.S. just got a lot more interesting as number two carrier AT&T agrees to acquire number four operator T-Mobile and combine resources to accelerate its deployment of high-speed LTE technology.
AT&T Sunday said it will acquire rival T-Mobile USA from Deutsche Telekom for stock and cash valued at $39 billion, saying it would use the deal to both accelerate and expand the reach of its push into 4G services. The deal combines the number two and four U.S. carriers – AT&T ends up with about 130 million subscribers and more network spectrum and backhaul capacity to offer greater wireless bandwidth to those customers.
For AT&T, the deal gives it a large network and customer base to compete with main U.S. rival Verizon Wireless, which is in the midst of a major roll-out of its LTE network and also recently gained access to the Apple iPhone, the device that has driven much of AT&T’s wireless momentum.
T-Mobile, meanwhile, has been rumored to have been on the block for quite some time, while more recently it has been raising its mobile broadband profile by deploying HSPA+ at speeds that top current 3G networks.
While AT&T also has been deploying HSPA+, it has at the same time been touting plans to move to LTE too – which it says its deal with T-Mobile will somehow accelerate. For instance, in its press release announcing the deal, AT&T said it is committing to a “significant expansion of robust 4G LTE deployment to 95% of the U.S. population to reach an additional 46.5 billion Americans beyond current plans.”
AT&T/T-Mobile will compete most directly with Verizon Wireless and Sprint Nextel, the latter of which (along with WiMax partner Clearwire) has been rumored to also have been on the block.
The acquisition is subject to regulatory approvals at the FCC and Department of Justice. In announcing the deal, AT&T took great pains to highlight the very competitive nature of the U.S. cellular industry and tout the benefit to customers. The companies said they expect the transaction to close in one year.
While AT&T’s move is undoubtedly a surprise, Connected Planet Wireless Editor Kevin Fitchard as much as called the deal back in February (CP: T-Mobile’s perfect merger partner? Try AT&T).
The perfect partner for T-Mobile would be none other that AT&T (NYSE:T). They use the same technologies, GSM and HSPA, and while they may be running 3G on different bands, that might actually work out to their advantage. I can envision AT&T using T-Mobile’s AWS HSPA network as a sort of super-3G overlay strictly for data cards and other high-bandwidth devices. It’s easier to procure USB dongles at T-Mobile’s weird frequencies than it is smartphones. T-Mobile’s HSPA networks are newer than AT&T’s and can be upgraded to faster versions of 3G more cheaply and more easily.
Meanwhile the PCS and cellular bands could be reserved for smartphones, feature phones and other lower-bandwidth data devices that don’t necessarily need a 21 Mb/s connection in one sitting. A merger would also solve T-Mobile’s 4G problems. AT&T has an LTE network at 700 MHz scheduled for 2011, which would obviate T-Mobile’s plans of re-farming its PCS frequencies for LTE.
AT&T and T-Mobile will be holding a press conference Monday morning at 8 a.m. ET, look for more analysis following the call.
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