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March 21, 2011

AT andT to buy T-Mobile USA for $39 Billion

AT&T Inc. will buy wireless provider T-Mobile USA from Deutsche Telekom    in a $39 billion cash-and-stock deal.

The companies reported jointly Sunday afternoon an agreement approved by the boards of directors of both companies. The $39 billion purchase price includes a cash payment of $25 billion with the balance to be paid using AT&T common stock, subject to adjustment. AT&Tassumes no debt from T-Mobile USA or Deutsche Telekom.

"AT&T's acquisition of T-Mobile USA 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," AT&T said in a press release. "In addition, it 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"

AT&T’s press release tells a very clear story of why AT&T bought T-Mobile and why T-Mobile bought ATT
It’s no secret that ATT has a tattered reputation. The iPhone may have brought it millions of new customers and billions in revenue, but the vast increase in data usage has also strained the network to unacceptable levels. There wouldn’t have been so much hype surrounding the Verizon iPhone if AT&T’s network didn’t drop so many calls and upset so many customers.

If the merger is approved by regulators, it would make AT&T ,the largest cellphone company in the country but leave 75 percent of cellphone subscribers in the hands of two carriers: AT&T and Verizon Wireless, which was the number one provider of mobile service in December, according to comScore Inc., a research firm

After the deal is complete in about a year,AT will expand 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.

The deal would strengthen AT&T's grip on the Bay Area cellphone market, but some industry critics said the combination would lead to higher prices for consumers since T-Mobile's rates tend to be lower than those of AT&;T or Verizon, the current No. 1 wireless carrier. And it comes as AT&T faces growing pressure from smartphone users, especially those with iPhones, who have long been frustrated with their service. Consumers have a choice since Verizon recently started selling the iPhone 4.