After months of rumors about its fate, Bellevue-based T-Mobile USA was sold today to AT&T for $39 billion in a deal that’s reshaping the wireless industry as it begins delivering a new generation of services and devices.
If the deal is approved by regulators, AT&T will become the nation’s largest wireless carrier by a significant margin, leapfrogging Verizon Wireless and extending its upcoming mobile broadband network to 95 percent of the population.
There was speculation in recent weeks that T-Mobile – the fourth-place carrier – would merge with third-place Sprint and perhaps Kirkland-based Clearwire, improving Sprint’s position against the largest two carriers, AT&T and Verizon.
But instead AT&T’s bulking up for its intensifying competition with Verizon, acquiring T-Mobile from parent Deutsche Telekom for $25 billion in cash and plus stock in a deal AT&T expects to close within the next 12 months.
AT&T will use T-Mobile’s spectrum and network of towers to improve the quality of its service, which has been a sore point since it was burdened by heavy data usage of iPhone users starting in 2007. It also settles for good the question of which “fourth generation” network T-Mobile will pursue, since its customers will now have access to the LTE technology that AT&T’s developing.
“This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation’s future,” Randall Stephenson, AT&T chairman and chief executive, said in the release. “It will improve network quality, and it will bring advanced LTE capabilities to more than 294 million people.”
T-Mobile and AT&T were already distant cousins. AT&T descended from the McCaw family cellular phone companies formed in the 1980s, and T-Mobile was previously a wireless company started by McCaw veteran John Stanton.
Together the companies employ around 8,500 people on the Eastside, but the overlapping administrative positions mean some cuts are likely.
AT&T didn’t specify what will happen to T-Mobile employees but its release implies that it intends to maintain T-Mobile staff and its large concentration of employees in the Seattle area. An excerpt:
Bringing AT&T and T-Mobile USA together will create an impressive workforce that is best positioned to compete in today’s global economy. Post-closing, AT&T intends to tap into the significant knowledge and expertise held by employees of both AT&T and T-Mobile USA to succeed. AT&T is the only major U.S. wireless company with a union workforce, offering leading wages, benefits, training and development for employees. The combined company will continue to have a strong employee and operations base in the Seattle area.
By acquiring T-Mobile, AT&T’s effort to expand its network leaps ahead. It also means that customers of the combined company will have access to both the current 3G network and AT&T’s new ultrafast fourth-generation LTE network as it comes online.
It’s acquiring 46.5 million T-Mobile customers, T-Mobile’s wireless spectrum and T-Mobile’s collection of cell sites.
AT&T’s market share will jump from about 33 percent to 43 percent with T-Mobile folded in. Verizon has around 35 percent of the wireless market.
Obtaining regulatory approval will be a challenge. The companies may be forced to divest markets, letting go some subscribers, to obtain approval, industry consultant Chetan Sharma said.
“I don’t see them approving as is,” he said, predicting that “it will be a long, drawn process in terms of analysis to see if this makes it less or more competitive.”
AT&T is apparently anticipating the scrutiny. In its release, it asserted that market competition is “escalating” and consumers have multiple wireless options:
“The U.S. wireless industry is one of the most fiercely competitive markets in the world and will remain so after this deal. The U.S. is one of the few countries in the world where a large majority of consumers can choose from five or more wireless providers in their local market. For example, in 18 of the top 20 U.S. local markets, there are five or more providers. Local market competition is escalating among larger carriers, low-cost carriers and several regional wireless players with nationwide service plans.”
AT&T said customers of both companies “will see service improvements – including improved voice quality – as a result of additional spectrum, increased cell tower density and broader network infrastructure. At closing, AT&T will immediately gain cell sites equivalent to what would have taken on average five years to build without the transaction, and double that in some markets.”