AT&T says the time is right for an acquisition of rival T-Mobile USA. In a conference call this morning with top company executives, AT&T laid out its plans for the $39 billion buyout of Deutsche Telekom's T-Mobile USA business.
"We've done this before," said Chairman and CEO Randall Stephenson, referring to AT&T's numerous prior acquisitions.
If the deal goes through, it would bring AT&T's subscriber base to about 130 million.
AT&T will have to justify the acquisition to both the FCC and the Department of Justice. The company will be burdened with proving that the transaction will benefit the public and will not adversely affect competition.
Stephenson noted an FCC report that showed that in 18 of the 20 largest markets in the United States, consumers currently have in excess of five choices for their wireless carrier. The company is confident that regulatory agencies will look at the effects the transaction on a market-by-market basis.
Stephenson also cited a 2010 report from the U.S. General Accounting Office (GAO) that states the overall average price (adjusted for inflation) for wireless services declined 50 percent from 1999 to 2009, during a period which saw five major wireless mergers.
Executives on the call said that both AT&T and T-Mobile are facing an impending spectrum crunch and that a merger of the two networks would be beneficial to customers of both companies. AT&T says it has seen an 8,000 percent increase in data traffic over the past four years. AT&T projects the addition of T-Mobile's existing network to increase network density by 30 percent in some of its major metropolitan markets, including Chicago, San Francisco and New York.
AT&T will continue its plan to complete 80 percent of its LTE rollout by the end of 2013. Ralph de la Vega, CEO of AT&T Mobility, said that the acquisition will allow AT&T to bring LTE to 95 percent of Americans.
The company spoke of expanding broadband to more Americans, a definite objective coming out of the White House recently. In terms of area covered, AT&T says the transaction will enable LTE deployment to an additional 1.2 million square miles, equivalent to 4.5 times the size of the state of Texas.
The $39 billion purchase price will include a cash payment of $25 billion with the balance to be paid using AT&T common stock. 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.
AT&T hopes to close on the deal in a year and says network improvements from the acquisition would be seen a year after close. The company said that the two companies will continue to compete as normal in the interim.