AT&T and Deutsche Telekom announced that they have entered into a definitive agreement under which AT&T will acquire T-Mobile USA in a cash-and-stock transaction currently valued at approximately $39 billion. The agreement has been approved by the Boards of Directors of both companies.
According to the companies, the acquisition provides "an optimal combination of network assets to add capacity sooner than any alternative, and it provides an opportunity to improve network quality in the near term for both companies’ customers." The companies also said that the acquisition provides "a fast, efficient and certain" solution to the impending exhaustion of wireless spectrum in some markets, which limits both companies’ ability to "meet the ongoing explosive demand for mobile broadband."
With this transaction, AT&T commits to a significant expansion of robust 4G LTE 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. In terms of area covered, the transaction enables 4G LTE deployment to an additional 1.2 million square miles, equivalent to 4.5 times the size of the state of Texas. T-Mobile USA does not have a clear path to delivering LTE.
According to AT&T and T-Mobile, their customers will see service improvements – including improved voice quality – as a result of additional spectrum, increased cell tower density and broader network infrastructure.
The acquisition will increase AT&T’s infrastructure investment in the U.S. by more than $8 billion over seven years.
"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. "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."
Stephenson continued, "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."
Deutsche Telekom Chairman and CEO René Obermann said, "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."
As part of the transaction, Deutsche Telekom will receive an equity stake in AT&T that, based on the terms of the agreement, would give Deutsche Telekom an ownership interest in AT&T of approximately 8 percent. A Deutsche Telekom representative will join the AT&T Board of Directors.
The combined company will continue to have a strong employee and operations base in the Seattle area.
The $39 billion purchase price will include a cash payment of $25 billion with the balance to be paid using AT&T common stock, subject to adjustment. AT&T has the right to increase the cash portion of the purchase price by up to $4.2 billion with a corresponding reduction in the stock component, so long as Deutsche Telekom receives at least a 5 percent equity ownership interest in AT&T.