AT&T Agrees To Buy T-Mobile For $39 Billion

Under the agreement, which was approved by both boards of directors, AT&T will buy T-mobile USA from Deutsche Telekom AG in a cash-and-stock transaction (AT&T will pay $25 billion in cash and an additional $14 billion in common stock). In addition, Deutsche Telekom will receive an 8 percent stake in AT&T and also gain a seat on AT&T's board.

If approved by shareholders and regulators, the acquisition will make AT&T the largest wireless carrier in the U.S., surpassing current leader Verizon Wireless. The deal would add 34 million wireless customers to the AT&T subscriber base, giving AT&T more than 125 million subscribers in the U.S.

AT&T said the addition of T-Mobile will help it expand its 4G LTE (Long Term Evolution) service deployment to an additional 46.5 million wireless users and to reach 95 percent of the U.S. population. In the announcement, AT&T said the T-Mobile deal will help achieve the Federal Communications Commission (FCC) and President Obamas goal to increase wireless Internet connectivity to all Americans.

"This transaction represents a major commitment to strengthen and expand critical infrastructure for our nations future," said Randall Stephenson, AT&T Chairman and CEO, in a press statement. "It will improve network quality, and it will bring advanced LTE capabilities to more than 294 million people. Mobile broadband networks drive economic opportunity everywhere, and they enable the expanding high-tech ecosystem that includes device makers, cloud and content providers, app developers, customers, and more. During the past few years, Americas high-tech industry has delivered innovation at unprecedented speed, and this combination will accelerate its continued growth."

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Deutsche Telekom had been rumored to be looking for a potential buyer for T-Mobile this year. Just last week, Bloomberg reported that Deutsche Telekom was in talks with Sprint for a potential sale of T-Mobile. However, those talks never came to fruition, and now AT&T's bold move could make Sprint a distant third to AT&T and Verizon.

"After evaluating strategic options for T-Mobile USA, I am confident that AT&T is the best partner for our customers, shareholders and the mobile broadband ecosystem," Deutsche Telekom Chairman and CEO Ren´┐Ż Obermann said in a press statement. "Our common network technology makes this a logical combination and provides an efficient path to gaining the spectrum and network assets needed to provide T-Mobile customers with 4G LTE and the best devices. Also, the transaction returns significant value to Deutsche Telekom shareholders and allows us to retain exposure to the U.S. market."

In addition to catapulting AT&T ahead of its chief rival Verizon in the subscriber race, the addition of T-Mobile could also help AT&T improve its service and coverage, which has been maligned in recent years as heavy data usage has strained the carrier's network. Verizon even mocked AT&T's wireless service in an advertising campaign in late 2009, which resulted in legal action between the two carriers.

AT&T said it expects the acquisition, if approved by regulators, to close in approximately 12 months.