AT&T to buy out T-Mobile USA


— 6:00 AM on March 21, 2011

This is another one of those "AMD buys ATI" moments. Except this time, the buyer is AT&T and the buy-ee is none other than Deutsche Telekom subsidiary T-Mobile USA. The two telecommunication firms broke the news on Sunday afternoon, although their $39-billion deal isn't expected to complete for another 12 months—provided regulatory entities don't torpedo the whole thing, that is.

As unexpected as this buyout might seem, it makes plenty of sense when you hear AT&T and T-Mobile explain it. A successful merger between the two companies will leave AT&T with "cell sites equivalent to what would have taken on average of five years to build without the transaction, and double that in some markets," they say. The most densely populated areas of AT&T's network should see an increase in network density of about 30%.

Translation: improved service, better call quality, and provisions for further growth in data traffic. AT&T says its mobile broadband traffic has grown by 8,000% since 2007 (that's when the original iPhone came out, for those keeping score), and it's expecting traffic in 2015 to be "eight to 10 times what it was in 2010," so the extra capacity will surely come in handy.

As icing on the cake, AT&T adds that acquiring T-Mobile will expand its 4G LTE coverage to "an additional 46.5 million Americans beyond current plans – including rural communities and small towns."

Securing regulatory approval for the merger might be a significant hurdle to overcome, though. As of last April, according to ComScore, AT&T and T-Mobile accounted for a combined 37.2% of the U.S. wireless market—more than Verizon and several times more than Sprint. Also, last summer, the folks at IE Market Research forecast that AT&T's high growth rate alone would let it outgrow Verizon by 2014. AT&T actually addresses anti-trust concerns in the buyout announcement, claiming the U.S. wireless industry is "one of the most fiercely competitive markets in the world and will remain so after this deal." We'll have to see if U.S. regulators feel the same way.

   
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