AT&T announces today that it is set to acquire the U.S. arm of Germany's Deutsche Telekom in a cash-and-stock transaction valued at $39 billion.
This will include a cash payment of $25 billion with the balance to be paid using AT&T common stock, subject to adjustment. Deutsche Telekom is to receive between five and eight percent equity ownership interest in AT&T. AT&T expects the transaction to close in approximately 12 months following necessary regulatory approvals and other closing conditions.
T-Mobile reported serving 33.73 million customers at the end of the fourth quarter of 2010. Acquisition of T-Mobile USA immediately expands AT&T's network density by approximately 30 percent in heavily populated areas.
A main reason for AT&T's interest in T-Mobile USA is the dramatic increase in wireless spectrum resulting from the merger. In its announcement, AT&T stated that US wireless spectrum is facing exhaust challenges in key markets due to explosive demand for mobile broadband and the merger provides a fast, efficient and certain solution to this problem. It also allows AT&T to commit to a significant expansion of its 4G LTE network set to cover more than 294 million people or 95 percent of the U.S population.
Deutsche Telekom Chairman of the Board, Rene Obermann said, "This was a very valuable transaction for Deutsche Telekom. We received US $39B and with these means we remain the largest single stockholder of AT&T and therefore have a chance to continue to participate in the American market, and we now have the financial power, the financial strength in order to implement our innovative strategy in our European businesses."
The sale of T-Mobile USA allows Deutsche Telekom to reduce its debt by approximately 13 billion Euro according to the company's Finance Chief, Timotheus Hoettges.
Reports have been surfacing for weeks that Deutshe Telekom was in talks to sell T-Mobile USA to Sprint. These talks had been apparently on and off for some time but a deal was not reached. Apparently the companies were not able to come to an agreement on the valuation of T-Mobile USA.