AT&T’s latest acquisition of rival wireless operator T-Mobile USA for $39 billion from Deutsche Telekom AG, will catapult it to the number one position in the US domestic market.
The company will have a total market share of 43% in the mobile telephony segment after the deal, putting it comfortably ahead of the current market leader Verizon Wireless.
Given the scale and scope of the deal – since it reduces competition in the wireless sector, regulatory approvals were required before the transaction could be completed.
AT&T will now be able to offer its range of products to T-Mobile customers, including the iPhone. The company is also investing heavily to upgrade its networks to handle rapidly increasing demand for data and videos.
The deal is expected to run into hurdles, analysts believe. Consumer rights group Public Knowledge has already fired the first salvo saying the deal will lead to “higher prices, fewer choices, less innovation”.
However, the dealmakers countered the argument saying US mobile call prices have dropped in recent times because of competition. However, AT&T said it expects regulators demanding the company sell some of its assets to trim down its balance sheet. Nonetheless, it’s hopeful that the deal can be closed in the next twelve months.
“This is a unique opportunity. It’s rare you have transactions where the synergies are greater than the price paid”, said AT&T chief executive Randall Stephenson. The company has done its homework on possible regulator objections, he added.
AT&T has been selling Apple iPhones since 2007, the same year Mr. Stephenson took over. The company’s revenue from wireless data services have been growing steadily since then.
T-Mobile has been somewhat lagging in the wireless data market after it failed to launch high speed wireless data network. By combining operations of both the companies, the merged entity hopes to save in excess of $40 billion in costs alone.