NEW YORK — AT&T Inc. said Sunday it will buy T-Mobile USA from Deutsche Telekom AG in a cash-and-stock deal valued at $39 billion that would make it the largest cellphone company in the United States.
The deal would reduce the number of wireless carriers with national coverage from four to three, and it is sure to face close regulatory scrutiny. It also removes a potential partner for Sprint Nextel Corp., the struggling No. 3 carrier, which had been in talks to combine with T-Mobile USA, according to Wall Street Journal reports.
AT&T is the country’s second-largest wireless carrier, and T-Mobile USA is the fourth-largest. The acquisition would give AT&T 129 million subscribers, vaulting it past Verizon Wireless’ 102 million. The combined company would serve about 43 percent of U.S. cellphones.
For T-Mobile USA’s 33.7 million subscribers, the news doesn’t immediately change anything. Because of the long regulatory process, AT&T expects the acquisition to take a year to close. But when and if it closes, T-Mobile USA customers would get access to AT&T’s phone lineup, including the iPhone.
The effect of reduced competition in the cellphone industry is harder to fathom. Public-interest group Public Knowledge said eliminating one of the four national phone carriers would be “unthinkable.”
“We know the results of arrangements like this — higher prices, fewer choices, less innovation,” Public Knowledge president Gigi Sohn said in a statement.
T-Mobile has relatively cheap service plans compared with AT&T, particularly when comparing the kind that don’t come with a two-year contract. AT&T chief executive Randall Stephenson said one of the goals of the acquisition would be to move T-Mobile customers to smartphones, which have higher monthly fees. AT&T “will look hard” at keeping T-Mobile’s no-contract plans, he said.
AT&T’s general counsel, Wayne Watts, said the cellphone business is “an incredibly competitive market,” with five or more carriers in most major cities. He pointed out that prices have declined in the past decade, even as the industry has consolidated. In the most recent mega- deal, Verizon Wireless bought No. 5 carrier Alltel for $5.9 billion in 2009.
Stifel Nicolaus analyst Rebecca Arbogast said the deal will face a tough review by the Federal Communications Commission and the Justice Department. She expects them to look market-by-market at whether the deal will harm competition. Even if regulators approve the acquisition, she added, they are likely to require AT&T to sell off parts of its business or T-Mobile’s business.
Verizon had to sell off substantial service areas to get clearance for the Alltel acquisition.
To mollify regulators, AT&T said in a statement Sunday it would spend an additional $8 billion to expand ultrafast wireless broadband into rural areas. Instead of covering about 80 percent of the U.S. population with its so-called Long Term Evolution, or LTE network, AT&T’s new goal would be 95 percent, it said.
The offer could help the FCC and the Obama administration meet their stated goals of bringing high-speed Internet access to all Americans. AT&T said its customers would benefit from the cell towers and wireless spectrum the deal would bring. In some areas, it would add 30 percent more capacity, AT&T said.
“It obviously will have a significant impact in terms of dropped calls and network performance,” Stephenson said.
