AT&T to acquire T-Mobile USA from Deutsche Telekom

by CXOtoday Staff    Mar 21, 2011

acquisitionAT&T (NYSE: T) and Deutsche Telekom (FWB: DTE) today 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.

“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,” remarked Randall Stephenson, Chairman and CEO, AT&T.

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.

The acquisition is expected to provide 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. With this transaction, AT&T commits to an expansion of 4G LTE (Long Term Evolution) 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.

“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,” remarked René Obermann, Chairman and CEO, Deutsche Telekom.

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 the telecom company an ownership interest in AT&T of approximately 8 percent. A Deutsche Telekom representative will join the AT&T Board of Directors.

The acquisition will increase AT&T’s infrastructure investment in the U.S. by more than $8 billion over seven years. The acquisition, however, is subject to regulatory approvals, a reverse breakup fee in certain circumstances, and other customary regulatory and other closing conditions. The transaction is expected to close in approximately 12 months.