In The Race For More Spectrum, AT&T Is Acquiring T-Mobile For $39 Billion

As anyone who has read a tech blog in the past few years will know, AT&T has been under attack for not being able to match the network capacity of larger rival Verizon. And when theywon 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.

Here’s the release with the details of the deal. AT&T will pay roughly $39 billion to Deutsche Telekom for T-Mobile USA. Deutsche Telekom will also get a roughly 8 percent ownership stake in AT&T as a result of the deal. And a Deutsche Telekom executive will join AT&T’s Board.

With the deal, AT&T will get access to T-Mobile’s roughly 35 million customers. If the two fully merge, this will push AT&T far past Verizon in terms of subscriber numbers. Currently, Verizon has about 100 million subscribers in the U.S., while AT&T has about 95 million. This deal will also leave Sprint as the lone large outsider, with about 50 million subscribers.

The agreement has already been approved by both Boards, but obviously will have to pass government scrutiny.

Here are AT&T CEO Randall Stephenson’s key quotes from the release:

“This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation’s future. It will improve network quality, and it will bring advanced LTE capabilities to more than 294 million people. Mobile broadband networks drive economic opportunity everywhere, and they enable the expanding high-tech ecosystem that includes device makers, cloud and content providers, app developers, customers, and more. During the past few years, America’s high-tech industry has delivered innovation at unprecedented speed, and this combination will accelerate its continued growth.”

And:

“This transaction delivers significant customer, shareowner and public benefits that are available at this level only from the combination of these two companies with complementary network technologies, spectrum positions and operations. We are confident in our ability to execute a seamless integration, and with additional spectrum and network capabilities, we can better meet our customers’ current demands, build for the future and help achieve the President’s goals for a high-speed, wirelessly connected America.”

And here’s Deutsche Telekom CEO René Obermann:

“After evaluating strategic options for T-Mobile USA, I am confident that AT&T is the best partner for our customers, shareholders and the mobile broadband ecosystem. Our common network technology makes this a logical combination and provides an efficient path to gaining the spectrum and network assets needed to provide T-Mobile customers with 4G LTE and the best devices. Also, the transaction returns significant value to Deutsche Telekom shareholders and allows us to retain exposure to the U.S. market.”

Stephenson’s wording, and other wording in the release referencing President Obama seems to be a clear message that AT&T thinks this deal should get government approval. Here’s the key blurb in that regard:

With this transaction, AT&T commits to a significant expansion of robust 4G LTE (Long Term Evolution) deployment to 95 percent of the U.S. population to reach an additional 46.5 million Americans beyond current plans – including rural communities and small towns. This helps achieve the Federal Communications Commission (FCC) and President Obama’s goals to connect “every part of America to the digital age.” T-Mobile USA does not have a clear path to delivering LTE.

The “rural communities” and “small towns” wording is a big part of both the net neutrality and spectrum debate. AT&T wants to make it clear that they’re doing this for the little guys. It’s a smart play, but whether or not it will work is another matter. Certainly, Verizon will have some things to say about this deal.

It also looks like T-Mobile customers may end up getting access to the iPhone after all… This commercial is certainly much more interesting now.