AT&T announced on Sunday that it had agreed to buy T-Mobile USA from Deutsche Telekom for $39 billion — a deal that would create the largest cellular carrier in the country.
The merger — one of the largest since the onset of the financial crisis — would combine the second and fourth largest cellular carriers in the nation, bringing together AT&T’s 95.5 million wireless subscribers with T-Mobile’s 33.7 million customers.
The transaction, which requires approval from regulators, is expected to be heavily scrutinized in Washington. The deal would leave only three major cellular carriers in the nation: AT&T, Verizon and a much smaller Sprint, which may now be forced to find a merger partner.
Already, some critics say the deal could result in higher prices for consumers. T-Mobile had offered some of the lowest rates in the country. While AT&T is expected to honor current T-Mobile contracts, it is likely that once those expire, T-Mobile customers may have to pay AT&T’s higher rates.
Still, according to the U.S. Government Accountability Office, cellular subscription costs fell 50 percent between 1999 and 2009, a period in which the industry has consolidated.
“Don’t believe the hype,” said S. Derek Turner, research director of Free Press Research, a Washington think tank. “There is nothing about having less competition that will benefit wireless consumers. And if regulators approve this deal, they will further cement duopoly control over the wireless market by AT&T and Verizon.”
From the companies perspective, a deal is a big cost saver. The combined company is expected save more than $40 billion – roughly the price of the deal – over the next three years by shuttering retail outlets in areas where they overlap, reducing the need to build new cellular sites as well as eliminating overlapping back office, technical and call center staff.
Marketing costs, too, could drop. Cellular carriers have been one of the biggest advertising spenders in the nation.
Of course, it all depends on whether the deal gets the O.K. from regulators. Deutsche Telecom was so worried that the deal will not be approved that it pushed AT&T to pay a big breakup fee as a form of insurance, according to people involved in the deal. AT&T agreed to pay Deutsche Telecom a massive $3 billion breakup fee, as well as offer the company spectrum if the deal is blocked by regulators.
In hopes of winning over lawmakers, AT&T has agreed to deploy its fourth generation wireless broadband coverage to 95 percent of the country, including rural and small communities.
The Justice Department is expected to weigh in on the deal, examining the combined company’s share on a market-by-market basis. In some cities, T-Mobile is not among the four largest players, potentially helping AT&T’s case for approval. For example, in Miami, San Francisco and Detroit, Metro PCS has more customers than T-Mobile.
In an interview, AT&T’s chairman and chief executive, Randall Stephenson, said he expects the industry “will continue to be a fiercely competitive market” pointing out that “prices continue to move down.” He also said that in many markets, “on the local level you have a choice of five or more providers. When you get to the facts this a deal that gets approved.”
Under the terms of the deal, AT&T will pay $25 billion in cash and the rest in stock. Deutsche Telekom will in turn gain an 8 percent stake in AT&T and a seat on the telecom giant’s board.
AT&T’s bid will finally solve the problem facing T-Mobile USA, the smallest of the country’s four major cellphone service providers. Both companies operate on the same wireless standard, GSM. Through the deal, T-Mobile will finally gain a path for the next generation of cellphone data, known as 4G, by using AT&T’s forthcoming LTE standard.
Deutsche Telekom had been considering its options for T-Mobile for over a year. It had considered an initial public offering for the company, but shelved it. More recently, it had held talks about selling the unit to Sprint.
The talks with AT&T– which started in earnest back in December of 2010 — heated up in recent weeks amid renewed speculation about a Sprint-T-Mobile tie-up, according to people involved in the talks.
To keep the deal from leaking, the AT&T team had devised a complicated list of code names, known as “Project Auto” to throw people off the scent. AT&T was called “Tesla”; Deutsche Telecom was “Daimler” and T-Mobile was “Mercury.” When asked why T-Mobile was named after “Mercury” – not exactly known as for high-performance vehicles – Mr. Stephenson of AT&T chuckled: “We needed an ‘M.’ Nothing more.”
An army of investment bankers, which are expected to make hundreds of millions of dollars worked on the deal. AT&T was advised by Greenhill & Company, JPMorgan Chase and Evercore Partners, as well as the law firms Sullivan & Cromwell, Arnold & Porter, and Crowell & Moring. Deutsche Telekom was advised mainly by Morgan Stanley. Deutsche Bank and Credit Suisse also acted as financial advisors for Deutsche Telekom. It, too, has hired a bevy of lawyers: Wachtell, Lipton, Rosen & Katz, Cleary Gottlieb and Wiley Rein to handle regulatory issues in Washington. SOURCE
Today's News Highlights 06.27.11
At Fort Campbell, mixed reviews for Afghan plan
Pfc. Rob Nunez, who spent eight months in Konar province near the Pakistani border, and some of his fellow soldiers have vastly different reactions to the plan.
(By Kevin Sieff)
Nancy Pelosi pursues her own ‘faith-based initiative’
House minority leader has her sights on winning back the speaker’s gavel for Democrats.
(By Karen Tumulty and Paul Kane)
Does GOP have a compromise on debt?
As President Obama prepares to meet with Senate leaders to try to restart talks over the debt, some Republicans see a potential path to compromise: Significant cuts in military spending.
(By Lori Montgomery and Paul Kane)
DNA links fugitive to professor’s slaying, FBI says
DNA evidence links a fugitive in Mexico to the killing of an American University professor, the FBI says.
(By Dan Morse)
A pair of veteran spies cross paths
Betty McIntosh and Doris Bohrer served in the OSS and CIA, but their remarkable friendship didn’t form until they moved to the same retirement community.
(By Ian Shapira)
POLITICS
President Barack Obama talks spending and debt limit with Senate leaders
WASHINGTON — President Barack Obama takes over negotiations on spending cuts and raising the government’s borrowing limit when he holds separate meetings Monday with Senate leaders.
( Associated Press Associated Press , AP)
Supreme Court to rule Monday on Arizona law giving extra cash to publicly funded candidates
WASHINGTON — The Supreme Court is expected to rule Monday on an Arizona campaign finance law that gives extra cash to publicly funded candidates who face privately funded rivals and independent groups.
( Associated Press Associated Press , AP)
AP IMPACT: Once-rural populations skyrocket near some US nuclear plants, evacuations unlikely
BUCHANAN, N.Y. — As America’s nuclear power plants have aged, the once-rural areas around them have become far more crowded and much more difficult to evacuate. Yet government and industry have paid little heed, even as plants are running at higher power and posing more danger in the event of an accident, an Associated Press investigation has found.
( Associated Press Associated Press , AP)
Supreme Court to rule Monday on California ban on sale, rental of violent video games to kids
WASHINGTON — Is it unconstitutional to ban the sale or rental of ultraviolent video games to children?
( Associated Press Associated Press , AP)
Supreme Court to rule Monday on Arizona law giving extra cash to publicly funded candidates
WASHINGTON — The Supreme Court is expected to rule Monday on an Arizona campaign finance law that gives extra cash to publicly funded candidates who face privately funded rivals and independent groups.
( Associated Press Associated Press , AP)
STYLE
Recession-wary performers turn Las Vegas Strip into parade of cartoon, movie characters
LAS VEGAS — The Las Vegas Strip is teeming with Spidermen, Elmos and Elvis Presleys of all waistlines.
( Associated Press Associated Press , AP)
Ask Amy: Husband ’fesses up to old affairs; wife is torn
Her husband confessed to indulging in two affairs years ago. She went to counseling with him and was told by the counselor to “get over it.” A) She’s not ready to and B) What kind of therapist is that?
(, Tribune Media Service)
Hints From Heloise: A unique wedding gift
Why not donate food left over from a wedding reception to a homeless shelter?
(, King)
Can sisters’ estrangement be avoided?
My religious-convert sister told my gay sister that she, her husband and children will not ever meet our gay sister’s 1-year-old twins.
(, The Washington Post)
Documentary presents case against tort reform
Susan Saladoff’s compellingly persuasive, no-nonsense documentary, “Hot Coffee,” explores the effects of the American war on “frivolous lawsuits.”
( by Hank Stuever , The Washington Post)
SPORTS
Sunday's Sports In Brief
LEON, Mexico — Two-time heart transplant recipient Erik Compton won the Mexico Open for his first Nationwide Tour title, closing with a 7-under 65 on Sunday for a two-stroke victory over Richard H. Lee.
( Associated Press Associated Press , AP)
Former Tar Heels star Jessica Breland recives Honda Inspiration Award at dinner
NEW YORK — Jessica Breland is always happy to share her story of overcoming Hodgkin’s lymphoma with the hope it can be helpful to someone else.
( Associated Press Associated Press , AP)
PGA Tour: Travelers win is Jacobson’s first title
CROMWELL, Conn. — Fredrik Jacobson closed out his first PGA Tour title on Sunday, shooting a 4-under 66 in the Travelers Championship for a one-stroke victory over John Rollins and Ryan Moore.
( Associated Press Associated Press , AP)
Knee, hamstring injuries had Mitts fearing World Cup 'jinx' but she's with US in Germany
DRESDEN, Germany — When Heather Mitts felt that familiar pain in her hamstring during training last month, it was almost too much for the U.S. defender.
( Associated Press Associated Press , AP)
Tseng runs away with LPGA Championship
Top-ranked Yani Tseng wins the LPGA Championship by 10 strokes and, at 22, become the youngest player to win four LPGA Tour majors.
( Associated Press Associated Press , AP)
WORLD
Malaysia says women must hold 30 percent of top corporate posts by 2016 for gender equality
KUALA LUMPUR, Malaysia — Malaysia’s government says women must hold 30 percent of top corporate posts by 2016 in a move toward gender equality in the boardroom.
( Associated Press Associated Press , AP)
Syrian opposition to meet in Damascus for first time since start of uprising
BEIRUT — Some 200 critics of President Bashar Assad’s regime are gathering in the Syrian capital for the first time since the start of the three-month uprising against his family’s rule.
( Associated Press Associated Press , AP)
China says arrival of Sudanese president in Beijing for talks has been delayed
BEIJING — A planned visit by Sudan’s president to China, which was criticized by rights groups because he is wanted on international war crimes charges, was delayed Monday, though officials gave no reason.
( Associated Press Associated Press , AP)
Chinese Premier Wen Jiabao to strike trade deals worth $1.6 billion in UK talks
LONDON — Britain says the U.K. and China are sealing trade deals worth 1 billion pounds (US$1.6 billion) at a summit between national leaders.
( Associated Press Associated Press , AP)
Palestinians fan out across globe to seek support for recognition at UN
RAMALLAH, West Bank — Palestinian delegations will make the rounds of nearly a dozen countries to try to drum up more support for their bid to have the United Nations recognize a Palestinian state, senior officials said Monday.
( Associated Press Associated Press , AP)
LIVE DISCUSSIONS
The Mil Life: Keeping spouses' careers, education off the chopping block
Military wives discuss keeping a career and educational goals through deployments.
(, vForum)
The Web Hostess: Online manners, memes and must-see video
A weekly chat about the best ways to kill time online. Our Web Hostess, Monica Hesse, sifts the Internet so you don't have to, searching for meaning, manners and the next great meme.
(, vForum)
Real Wheels Live
Live online discussion with Real Wheels columnist Warren Brown about car-buying and the auto industry.
(, vForum)
Lisa de Moraes on the TV Column
Post TV columnist Lisa de Moraes is back and ready to chat about all the drama, comedy and heartbreak of the world of television -- both onscreen and behind-the-scenes!
(, vForum)
Lisa de Moraes on the TV Column
Post TV columnist Lisa de Moraes is back and ready to chat about all the drama, comedy and heartbreak of the world of television -- both onscreen and behind-the-scenes!
(, vForum)
TECHNOLOGY
The Celebrity Moment
( by TechCrunch.com , TechCrunch.com)
Startups Don’t Die, They Commit Suicide
( by TechCrunch.com , TechCrunch.com)
Fanvibe Signs A Letter Of Intent To Be Acquired By beRecruited
( by TechCrunch.com , TechCrunch.com)
RunKeeper Adds New Integration To Its Health Graph In Hopes Of Building ‘The Facebook Of Fitness’
( by TechCrunch.com , TechCrunch.com)
World stock markets mixed on fears that Europe's debt crisis is about to get worse
BANGKOK — World markets were mixed Monday as Greece’s parliament began debating harsh new austerity measures that must pass for the country get its next batch of emergency financial aid.
( Associated Press Associated Press , AP)
BUSINESS
Greek deputies to begin debate on crucial austerity plans before votes
ATHENS, Greece — Greek lawmakers begin debating new austerity plans Monday that must pass this week if the debt-ridden country is to receive the critical next installment of loans from its international bailout plan and avoid default.
( Associated Press Associated Press , AP)
The Celebrity Moment
( by TechCrunch.com , TechCrunch.com)
Saab says $18.4 million car order from China could pay staff's wages
STOCKHOLM — Troubled car maker Saab Automobile AB has received a €13 million ($18.4 million) car order from a Chinese company that could help pay salaries to its employees, its owner Swedish Automobile AB said Monday.
( Associated Press Associated Press , AP)
Akzo Nobel, world's biggest paintmaker, warns 'adverse factors' will hurt Q2 earnings
AMSTERDAM — Akzo Nobel NV, the world’s largest maker of paint, warned Monday that second-quarter earnings will be hurt by commodity price rises, weak business in some regions and maintenance delays at some plants.
( Associated Press Associated Press , AP)
Oil falls to near $90 a barrel in Asia as US dollar gains amid Greek debt crisis
SINGAPORE — Oil prices fell to near $90 a barrel Monday in Asia as a stronger U.S. dollar made crude more expensive for investors with other currencies.
( Associated Press Associated Press , AP)
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