The news just broke that AT&T, the nation’s #2 carrier with 94 million subscribers, agreed to acquire T-Mobile USA, a Deutsche Telekom-owned wireless provider that had 33.73 million customers last year providing them with an annual revenue of 21.35 billion.
The transaction will involve cash and stock changing hands, with AT&T paying $25 billion cash and $14 billion stock to acquire T-Mobile USA for a combined value of $39 billion. The deal has been approved by both companies’ boards of directors and is pending customary regulatory approval. A press release announcing the acquisition has been issue by both AT&T and T-Mobile USA.
The new company will be a joint venture between the two carriers, with Deutsche Telekom holding up to eight percent stake and AT&T taking over US mobile business from the German company. It will files as the leading wireless provider in the country with a whooping 130 million subscribers versus 90+ million subscribers for Verizon Wireless.
As a result, American competitive landscape looks a lot like duopoly because two major companies now controll the vast majority of the market, creating an impenetrable barrier to entry for other players. On the upside, consumers may benefit from a single business entity operating a huge GSM network.
AT&T will provide 4G LTE service for T-Mobile USA’s subscribers and pledged to expand 4G LTE deployment to an additional 46.5 million people in the country, for a "total of 294 million or 95 percent of the US population." They will also spend more than $8 billion over the course of seven years in infrastructure upgrades.
