AT&T to buy T-Mobile USA, creating U.S. wireless giant

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AT&T Inc. announced Sunday it would buy T-Mobile USA in a cash and stock deal worth $39 billion, a move that would combine two of the largest U.S. wireless providers and build a telecommunications behemoth that would tower over Verizon Wireless, the other leading cellular network.

The merger would combine AT&T’s 95.5 million wireless subscribers with another 33.7 million from T-Mobile, a division of the German communications conglomerate Deutsche Telekom. With close to 130 million subscribers on a wireless system that would combine the vast national networks of both companies, the resulting union would far outstrip Verizon and its 94.1 million customers.

AT&T suggested that increased competition resulting from the deal could benefit consumers but did not explicitly say the plan would mean lower prices for its customers.

“This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation’s future,” AT&T Chief Executive Randall Stephenson said in a statement.

AT&T highlighted the efficiency savings it would garner from a merger, given that both companies use similar cellular technology -- as opposed to a different model used by Verizon -- and both are planning to take similar steps toward the next generation of faster 4G networks.

Part of AT&T’s gambit has to do with the steep rise in the use of data services by consumers with sophisticated smart phones. With many more users adopting video-ready, Internet-connected phones such as Apple’s iPhone and the many Google-powered Android devices, demand for wireless bandwidth among consumers is quickly increasing, and the industry has been struggling to stay ahead of that demand.

AT&T said data traffic on its wireless network had grown 8,000% over the last four years.

‘Because AT&T has led the U.S. in smart phones, tablets and e-readers -- and as a result, mobile broadband -- it requires additional spectrum before new spectrum will become available.’

Critics quickly warned about the perils of conglomeration, saying federal regulators should scrutinize the deal carefully lest it actually lead to less market flexibility.

‘Don’t believe the hype: There is nothing about having less competition that will benefit wireless consumers,’ said S. Derek Turner, research director at media industry watchdog Free Press, in a statement.

“A market this concentrated -- where the top four companies already control 90% of the business, and two of them want to merge -- means nothing but higher prices and fewer choices, as the newly engorged AT&T and Verizon exert even more control over the wireless Internet.’

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-- David Sarno