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Monday, March 21, 2011

AT&T Acquires T-Mobile, Rockets Up to More Than 130 Million U.S. Users

By David Murphy

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Breaking news in the mobile world: AT&T has acquired competitor T-Mobile, shrinking the "big four" carriers in the U.S. to a mere three. But it's a mighty three. The $39 billion purchase now summons forth the largest combined carrier in the U.S., one which already has its own nickname mere minutes after the transaction was announced: "AT&T-Mobile."

In total, AT&T and T-Mobile's combined operations will carry roughly 130 million users. Or, in layman's terms, a heckuva lot more people than now-second place Verizon and its users numbering in the mid-90 million.

But what does that mean for consumers? According to's Sascha Segan, expect less competition in the mobile market to hit harder on the ol' bank account. Not to mention a greater lack of device diversity as a result of AT&T and T-Mobile creating a combined (and more efficient) product line.

AT&T's paying $25 billion in cash for the acquisition, with the rest of the $39 billion purchase price coming from shares of AT&T common stock. As part of the deal, T-Mobile parent company Deutsche Telekom will gain an eight percent ownership interest in AT&T, and a Deutsche Telekom representative will join AT&T's board of directors.

The also move creates a monopoly on U.S. GSM carriers: There's just one now, AT&T/T-Mobile, to serve as the sole rival against the CDMA networks of competitors Sprint and Verizon. The mash-up between AT&T and T-Mobile—a combination of the worst and second-worst U.S. carriers, as ranked by this year's Consumer Reports customer survey–will mash together their wireless spectrums as well. This should give AT&T a stronger footing to deploy and expand its own 4G LTE network, which the company intends to launch mid-year.

"This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation's future," said Randall Stephenson, AT&T chairman and CEO, in today's press release. "It will improve network quality, and it will bring advanced LTE capabilities to more than 294 million people."

According the release, issued today, AT&T needs as much spectrum as it can get its hands on to fuel its growing wireless network. The company claims that its mobile data traffic has grown more than 8,000 percent since 2006, and the company expects its 2015 traffic to be eight to 10 times that of today's values.

"Put another way, all of the mobile traffic volume AT&T carried during 2010 is estimated to be carried in just the first six to seven weeks of 2015," reads the statement.

Doubling off of that, the T-Mobile acquisition comes at a time when AT&T is seeing good subscriber growth—the company announced in January a gain of 2.8 million subscribers in the fourth quarter of 2010, making for a total count of 8.9 million subscribers gained within the full fiscal year.

T-Mobile, on the other hand, has been bleeding its business as of late. The company lost more than 300,000 contract subscribers in its fourth quarter, down a net of 23,000 customers in total. That's quite a drop compared to the same time period in 2009, when T-Mobile was actually in the black by around 371,000 total customers.

A March report by Bloomberg's Tara Lachapelle and Rita Nazareth indicated that T-Mobile parent company Deutsche Telekom has been shopping around T-Mobile for some time now—especially since the $28.5 billion the company invested in the American carrier has since shed its value by approximately three-fifths. Deutsche Telekom was allegedly in talks with Sprint to pawn off T-Mobile, but whatever deal was possibly in the works clearly didn't come to pass.

But that's not necessarily bad for T-Mobile: Instead of shacking up with the third-place carrier, it's now teamed up with the big dog in the park.

For more information on the transaction, consumers can check out the new AT&T/T-Mobile information site at