AT&T has announced that it has entered into a definitive agreement with German telecoms group Deutsche Telekom to acquire its T-Mobile USA unit in a cash-and-stock transaction valued at approximately USD39 billion. The agreement has been approved by the boards of directors of both firms. The companies have confirmed that, as a part of the transaction, Deutsche Telekom will receive an equity stake in AT&T worth approximately 8%. A Deutsche Telekom representative will also join the AT&T board of directors. The USD39 billion price-tag rice will include a cash payment of USD25 billion, with the balance paid using AT&T common stock. It is noted that AT&T has the right to increase the cash portion of the purchase price by up to USD4.2 billion, with a corresponding reduction in the stock component. However, Deutsche Telekom must receive a minimum 5% ownership interest in AT&T. The number of AT&T shares issued will be based on the AT&T share price during the 30-day period prior to the transaction closing, subject to a 7.5% collar; there is a one-year ‘lock-up period’ during which Deutsche Telekom cannot sell any of its shares.
Randall Stephenson, AT&T chairman and CEO, commented: ‘This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation’s future. It will improve network quality, and it will bring advanced Long Term Evolution (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, America’s high-tech industry has delivered innovation at unprecedented speed, and this combination will accelerate its continued growth. This transaction delivers significant customer, shareowner and public benefits that are available at this level only from the combination of these two companies with complementary network technologies, spectrum positions and operations. We are confident in our ability to execute a seamless integration, and with additional spectrum and network capabilities, we can better meet our customers’ current demands, build for the future and help achieve the President’s goals for a high-speed, wirelessly-connected America’.
Deutsche Telekom chairman and CEO Rene Obermann added: ‘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. 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 US market’.
AT&T has claimed that, when the transaction closes, it will immediately gain cell sites equivalent to what would have taken five years to build. The merger will increase AT&T’s network density by approximately 30% in some of its most populated areas, while avoiding the need to construct additional cell towers. The operator has said that the transaction will increase spectrum efficiency, capacity and output. Further, AT&T claims that the transaction will directly benefit an additional 46.5 million Americans who will gain hitherto unavailable access to AT&T’s LTE network.