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AT&T to Buy T-Mobile USA, Will Increase U.S. Carrier Lead

Michael Santo's picture

AT&T has announced a deal with T-Mobile USA's parent company, Deutsche Telekom, in which the No. 1 wireless carrier will purchase the No. 4 carrier for some $39 billion in cash and stock.

Assuming this acquisition passes federal regulators, this would make AT&T the largest wireless carrier in the United States, by far. At the end of 2010, AT&T had 95.5 million wireless subscribers and T-Mobile had 33.7 million subscribers, for a combined total of 129.2 million subscribers if the acquisition is approved. Meawhile, Verizon Wireless had 94.1 million wireless customers. As close as it was to AT&T, it was expected that Verizon would overtake AT&T based on the Verizon iPhone.

Earlier, it was rumored that Sprint was in talks with Deutsche Telekom for T-Mobile USA. As the nation's No. 3 carrier, it would have been more cash-strapped than AT&T, and thus it appears that AT&T outbid Sprint. Now, the future of Sprint remains unclear. If the deal were to go through, Sprint would be the only iPhone-less carrier in the nation, and might be hamstrung by that fact.

AT&T and T-Mobile are GSM-based carriers, and thus the acquisition would appear to be smoother than could have been done with a Sprint acquisition of T-Mobile. Sprint uses CDMA technology, as does Verizon, for its 3G service. Sprint uses WiMax for 4G. Verizon is using LTE, which is the same as AT&T has already committed to, but although Verizon has already rolled out production level LTE service in many areas, AT&T is not scheduled to test LTE in areas of the country until mid-2011.

Meanwhile, T-Mobile, while calling its 3.5G HSPA+ service 4G, had never committed to a 4G technology.

As part of the transaction, Deutsche Telekom will receive an equity stake in AT&T that would give Deutsche Telekom an 8 percent ownership stake in AT&T. A Deutsche Telekom representative of the company will also join the AT&T Board of Directors. The agreement has been approved by the Boards of Directors of both companies, Deutsche Telekom said in a statement.

Image Source: Wikimedia Commons

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