Bombshell: AT&T to Buy T-Mobile *UPDATED*

While talks of someone buying T-Mobile is nothing new, there’s been a lot of rumors that it might be Sprint doing it the last few weeks. Deutsche Telekom, T-Mobile’s parent company, has been losing money on T-Mobile for years and has been looking to get rid of it to focus on their European branches.

AT&T just announced that they have agreed to buy T-Mobile to the tune of $39 billion, $25 billion of that cash, the rest stock options. AT&T says it will be using T-Mobile’s existing network to bolster the famously precarious (in certain locations) AT&T network, and will use T-Mobile assets to push it’s 4G initiative to an additional 46.5 million Americans over the next few years.

Assuming they get the green-light from the government, the acquisition will take around a year. After that time, AT&T will become the only GSM carrier on a national level (some rural carriers still use it), giving them around 130 million subscribers nationwide. This will make them the largest US carrier, passing Verizon’s 102 million (as per the final quarter of 2010).

A $39 billion acquisition that will bring the major wireless competition down to just 3 carriers will have a very hard time going through the Department of Justice and FCC, most likely though. We’re in for a very long road ahead on this one. AT&T will be hosting a conference call on this tomorrow, so keep checking back here to find out more information.

If the buy out goes through, what will this mean? T-Mobile subscribers will eventually become AT&T customers in most areas throughout the country. Often times, 3rd parties gain some small areas, like how AT&T gained some Alltel customers when they were purchased by Verizon a few years ago. WHen the dust settles, there will be a lot less competition. Even though they were a small company who wasn’t making money, T-Mobile helped keep the monthly price of wireless plans down. With Sprint being the only company that doesn’t have the mass that Big Red and Ma Bell have, you can expect costs to go up. Someone’s got to pay that $39 billion bill, right? You can check out the full press release yourself right here.

UPDATE: Got my hands on the T-Mobile press release. Looks like T-Mobile will be working to keep as much T-MObile staff as possible, which is good news, and confirms the estimated 1 year timeline for the transition. T-Mobile claims that this will reduce Deutshce Telekom’s debt by about 31%.

A lot of people are asking what this will mean for T-Mobile customers. While there haven’t been any specifics on the transfer of contracts or anything of that nature, here’s what you can expect to happen (based on previous buyouts):

– Your contract will not be cancelled. When one carrier buys another, they also buy these contracts and are required to honor them. This means you’ll keep your phone, number, and plan as is. Should they decide to not honor T-Mobile’s plans, it will a breach of contract on their part, meaning you can leave without penalty. However, when you become eligible for an upgrade, they are not required (and therefor most likely won’t) honor your old plan. This means that for as long as you don’t upgrade and get a subsidized price for the phone, you can keep your plan for as long as they let you. But if you want to buy an iPhone (the common T-Mobile question), you will most likely have to move to an AT&T plan.

– If this buyout is like the Verizon/Alltel one, then some markets will find themselves absorbed by other carriers to prevent monopoly (though it could be argued that this buyout would cause one anyway). In this case, T-Mobile subscribers in those areas will be given to Verizon, Sprint, or smaller local carriers. If this is the case (though it’s doubtful since T-Mobile is mainly just in urban areas), then the same scenario I spelled out above will most likely hold true.


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