LiNuX
03-20-2011, 08:19 PM
AT&T Inc. said it was buying T-Mobile USA from Deutsche Telekom AG for $39 billion in cash and stock, a move that would create the nation's largest wireless carrier and shift the competitive landscape of the U.S. industry.
In stitching together the second- and fourth-largest U.S. mobile carriers, AT&T is showing a fearless attitude toward U.S. regulators, who will be heavily scrutinizing what is the largest planned merger deal of 2011. T-Mobile has long been an antagonist to AT&T and chief rival Verizon Wireless, offering low prices that kept pressure on rates.
AT&T agreed to buy T-Mobile USA for $39 billion in cash and stock, in a deal that combines the No. 2 and No. 4 U.S. wireless carriers. WSJ's Dennis Berman and Lauren Goode discuss whether the tie-up will pass regulatory scrutiny and who the winners and losers of the deal are.
The carriers would be able to make an estimated $40 billion in cost cuts, probably resulting in thousands of job losses. AT&T employs 267,000 people, while T-Mobile USA employs about 29,000.
AT&T plans to retire the T-Mobile name in the U.S., giving AT&T nearly 130 million customers. That is about a third more than the current market leader by revenue, Verizon Wireless, and more than twice as many as No. 3 Sprint Nextel Corp., which will have even a harder time competing. Deutsche Telekom will continue to use the T-Mobile name for operations in Europe.
The deal has been approved by the boards of both AT&T and Deutsche Telekom. If it goes through, Sprint could be forced to find a buyer of its own, potentially a big cable operator. Alternatively, it could bulk up, such as by acquiring a smaller carrier.
AT&T customers have been disgruntled about the quality of the company's network, especially for voice calls made over Apple Inc.'s iPhone.
In the months prior to the deal, T-Mobile pummeled AT&T in a marketing campaign claiming superiority of its wireless coverage over what it argued was AT&T's overburdened network.
On Sunday, AT&T pitched the deal as a way to solve network congestion, by combining two operators using the same technology and alleviating a spectrum shortage that would keep T-Mobile from building a next-generation network.
AT&T also said the combination would mean better wireless broadband service in rural areas, a priority of the Obama administration, pledging to cover 95% of the population.
Still, the Federal Communications Commission warned last May of growing concentration among wireless providers and, for the first time in years, didn't conclude in its annual industry report that the industry is competitive. The FCC would have to approve the transfer to AT&T of T-Mobile's licenses to slices of the radio spectrum that carry calls and data.
For Deutsche Telekom, a sale of T-Mobile would resolve what has become the company's central strategic challenge. The German company acquired the former VoiceStream Wireless for $35 billion in 2001 at the top of the market.
In the heady days of the telecom boom, Deutsche Telekom saw the purchase as a bold expression of its global ambitions. In years that followed, Deutsche Telekom pumped billions into the business to expand the network and add spectrum, but it was often a step behind rivals and failed to build a subscriber base to match its rivals.
Under the terms of Sunday's deal, AT&T would pay $25 billion in cash and the rest in stock. Deutsche Telekom would gain an 8% stake in AT&T and a seat on its board.
AT&T has an 18-month commitment for a one-year bank loan to help finance the deal, underwritten by J.P. Morgan for $20 billion. It is one of the largest financings by the bank for a single deal. AT&T has also committed to pay Deutsche Telekom a $3 billion fee, in addition to handing over some spectrum, if the deal doesn't close. These terms helped AT&T win Deutsche Telekom's support of the transaction, people familiar with the matter said.
[ATT_p1]
For AT&T, the deal tilts its business more toward its faster-growing wireless side, which would produce 80% of its revenue after the combination.
The wireless industry had recently focused on a possible merger between Sprint Nextel and T-Mobile USA. But AT&T and Deutsche Telekom have been in talks since December, according to people familiar with the situation.
AT&T's chief executive, Randall Stephenson, said he met with his counterpart at Deutsche Telekom, Rene Obermann, in various locations across the globe to discuss the transaction.
A primary catalyst was the need for spectrum—basically, the right to transmit signals over certain wavelengths. T-Mobile lacked sufficient spectrum to upgrade to next-generation wireless technology. AT&T faced a longer-term capacity crunch because of the explosion of data traffic.
AT&T's Mr. Stephenson said he was confident any regulatory challenges could be overcome, in part because the merger would conserve spectrum at a time when it is in tight supply.
Forrester Research analyst Charles Golvin said the acquisition would bring better coverage to more people, but prices likely wouldn't come down as fast with AT&T and Verizon controlling nearly three of every four U.S. subscribers.
Some AT&T customers have complained about the quality of its network. Above, an AT&T store in New York.
Gigi B. Sohn, president of Public Knowledge, a group that lobbies for consumer rights concerning technology, said, "The wireless market, now dominated by four big companies, would have only three at the top. We know the results of arrangements like this: higher prices, fewer choices, less innovation."
Mr. Stephenson said the market is already competitive, even though AT&T and Verizon subscribers far outnumber those of smaller competitors. "This is probably the most fiercely competitive wireless market in the world," he said. "The majority of Americans have the option of five different wireless carriers."
Mr. Stephenson said he hasn't yet engaged regulators. But he said AT&T extensively studied the implications of the transaction for the last few months, and believes it will pass muster.
AT&T expects the deal to close within 12 months, but is prepared to divest itself of "substantial" parts of its wireless subscriber base in certain markets to appease regulators, a person familiar with the matter said.
At the same time, the transaction could renew debate at the FCC over whether spectrum caps are needed to encourage competition in the wireless market.
Greenhill & Co., J.P. Morgan Chase & Co. and Evercore Partners advised AT&T, along with law firms Sullivan & Cromwell LLP, Arnold & Porter, and Crowell & Moring.
Morgan Stanley is lead financial adviser to Deutsche Telekom, and Deutsche Bank and Credit Suisse also advised the German firm. Law firms Wachtell, Lipton, Rosen & Katz, Cleary Gottlieb Steen & Hamilton LLP and Wiley Rein LLP provided legal advice.
Source: ATT to Buy T-Mobile USA in $39 Billion Deal - WSJ.com (http://online.wsj.com/article/SB10001424052748704433904576212810008230654.html)
Thousands of jobs could be lost in this and prices could be driven up. It could also get competitive with providers like Sprint and Verizon and prices could go down but I doubt that'll happen. We need to stop oligopolies like this and instead of merging, we need more companies to arise with similar product and create more competition.
We'll have to see if it gets approved.
In stitching together the second- and fourth-largest U.S. mobile carriers, AT&T is showing a fearless attitude toward U.S. regulators, who will be heavily scrutinizing what is the largest planned merger deal of 2011. T-Mobile has long been an antagonist to AT&T and chief rival Verizon Wireless, offering low prices that kept pressure on rates.
AT&T agreed to buy T-Mobile USA for $39 billion in cash and stock, in a deal that combines the No. 2 and No. 4 U.S. wireless carriers. WSJ's Dennis Berman and Lauren Goode discuss whether the tie-up will pass regulatory scrutiny and who the winners and losers of the deal are.
The carriers would be able to make an estimated $40 billion in cost cuts, probably resulting in thousands of job losses. AT&T employs 267,000 people, while T-Mobile USA employs about 29,000.
AT&T plans to retire the T-Mobile name in the U.S., giving AT&T nearly 130 million customers. That is about a third more than the current market leader by revenue, Verizon Wireless, and more than twice as many as No. 3 Sprint Nextel Corp., which will have even a harder time competing. Deutsche Telekom will continue to use the T-Mobile name for operations in Europe.
The deal has been approved by the boards of both AT&T and Deutsche Telekom. If it goes through, Sprint could be forced to find a buyer of its own, potentially a big cable operator. Alternatively, it could bulk up, such as by acquiring a smaller carrier.
AT&T customers have been disgruntled about the quality of the company's network, especially for voice calls made over Apple Inc.'s iPhone.
In the months prior to the deal, T-Mobile pummeled AT&T in a marketing campaign claiming superiority of its wireless coverage over what it argued was AT&T's overburdened network.
On Sunday, AT&T pitched the deal as a way to solve network congestion, by combining two operators using the same technology and alleviating a spectrum shortage that would keep T-Mobile from building a next-generation network.
AT&T also said the combination would mean better wireless broadband service in rural areas, a priority of the Obama administration, pledging to cover 95% of the population.
Still, the Federal Communications Commission warned last May of growing concentration among wireless providers and, for the first time in years, didn't conclude in its annual industry report that the industry is competitive. The FCC would have to approve the transfer to AT&T of T-Mobile's licenses to slices of the radio spectrum that carry calls and data.
For Deutsche Telekom, a sale of T-Mobile would resolve what has become the company's central strategic challenge. The German company acquired the former VoiceStream Wireless for $35 billion in 2001 at the top of the market.
In the heady days of the telecom boom, Deutsche Telekom saw the purchase as a bold expression of its global ambitions. In years that followed, Deutsche Telekom pumped billions into the business to expand the network and add spectrum, but it was often a step behind rivals and failed to build a subscriber base to match its rivals.
Under the terms of Sunday's deal, AT&T would pay $25 billion in cash and the rest in stock. Deutsche Telekom would gain an 8% stake in AT&T and a seat on its board.
AT&T has an 18-month commitment for a one-year bank loan to help finance the deal, underwritten by J.P. Morgan for $20 billion. It is one of the largest financings by the bank for a single deal. AT&T has also committed to pay Deutsche Telekom a $3 billion fee, in addition to handing over some spectrum, if the deal doesn't close. These terms helped AT&T win Deutsche Telekom's support of the transaction, people familiar with the matter said.
[ATT_p1]
For AT&T, the deal tilts its business more toward its faster-growing wireless side, which would produce 80% of its revenue after the combination.
The wireless industry had recently focused on a possible merger between Sprint Nextel and T-Mobile USA. But AT&T and Deutsche Telekom have been in talks since December, according to people familiar with the situation.
AT&T's chief executive, Randall Stephenson, said he met with his counterpart at Deutsche Telekom, Rene Obermann, in various locations across the globe to discuss the transaction.
A primary catalyst was the need for spectrum—basically, the right to transmit signals over certain wavelengths. T-Mobile lacked sufficient spectrum to upgrade to next-generation wireless technology. AT&T faced a longer-term capacity crunch because of the explosion of data traffic.
AT&T's Mr. Stephenson said he was confident any regulatory challenges could be overcome, in part because the merger would conserve spectrum at a time when it is in tight supply.
Forrester Research analyst Charles Golvin said the acquisition would bring better coverage to more people, but prices likely wouldn't come down as fast with AT&T and Verizon controlling nearly three of every four U.S. subscribers.
Some AT&T customers have complained about the quality of its network. Above, an AT&T store in New York.
Gigi B. Sohn, president of Public Knowledge, a group that lobbies for consumer rights concerning technology, said, "The wireless market, now dominated by four big companies, would have only three at the top. We know the results of arrangements like this: higher prices, fewer choices, less innovation."
Mr. Stephenson said the market is already competitive, even though AT&T and Verizon subscribers far outnumber those of smaller competitors. "This is probably the most fiercely competitive wireless market in the world," he said. "The majority of Americans have the option of five different wireless carriers."
Mr. Stephenson said he hasn't yet engaged regulators. But he said AT&T extensively studied the implications of the transaction for the last few months, and believes it will pass muster.
AT&T expects the deal to close within 12 months, but is prepared to divest itself of "substantial" parts of its wireless subscriber base in certain markets to appease regulators, a person familiar with the matter said.
At the same time, the transaction could renew debate at the FCC over whether spectrum caps are needed to encourage competition in the wireless market.
Greenhill & Co., J.P. Morgan Chase & Co. and Evercore Partners advised AT&T, along with law firms Sullivan & Cromwell LLP, Arnold & Porter, and Crowell & Moring.
Morgan Stanley is lead financial adviser to Deutsche Telekom, and Deutsche Bank and Credit Suisse also advised the German firm. Law firms Wachtell, Lipton, Rosen & Katz, Cleary Gottlieb Steen & Hamilton LLP and Wiley Rein LLP provided legal advice.
Source: ATT to Buy T-Mobile USA in $39 Billion Deal - WSJ.com (http://online.wsj.com/article/SB10001424052748704433904576212810008230654.html)
Thousands of jobs could be lost in this and prices could be driven up. It could also get competitive with providers like Sprint and Verizon and prices could go down but I doubt that'll happen. We need to stop oligopolies like this and instead of merging, we need more companies to arise with similar product and create more competition.
We'll have to see if it gets approved.