Report: AT&T to Acquire T-Mobile from Deutsche Telekom (Updated)

The Wall Street Journal is reporting that AT&T will acquire T-Mobile. The purchase has been reported to cost $39 billion and will withdraw Deutsche Telekom from the American market. This surprise move would make AT&T the largest carrier in the nation, and would deprive Sprint Nextel corporation of its current acquisition target.

AT&T will likely face large amounts of regulatory scrutiny for this move, as it will not only draw down the number of national, major wireless carriers to three, but could also destabalize competition by allowing AT&T to further strengthen its position in the industry. Sprint’s acqusition of T-Mobile would likely have faced less regulatory scrutiny, as both Sprint and T-Mobile were viewed in the industry as weaker than AT&T and Verizon.

The move however is one of the most logical acquisitions technologically. AT&T and T-Mobile both are GSM/UMTS operators, both using HSPA+, with pathways to roll out LTE in the future. While T-Mobile and AT&T operate on different 3G frequencies, both offer similar coverage maps, and device manufacturers can offer quad-band devices to access both global and AWS frequencies.

An acquisition of T-Mobile by Sprint would have required additional transitions, as Sprint’s CDMA/WiMAX network would be incompatible with T-Mobile’s GSM/UMTS/HSPA network, similar to Sprint’s painful merger with Nextel. However, Sprint would likely have been focused on shedding Clearwire and transitioning all customers quickly to an LTE network using multi-mode hardware, and T-Mobile’s spectrum assets.

Terms of the acquisition have not been confirmed by PhoneNews.com, and PhoneNews.com cannot independently verify the report.

Update: AT&T has opened a dedicated portal with the title of Mobilize Everything to explain and breakdown the acquisition. The $39 billion purchase price has been confirmed by the announcement, as well as the usage of a $20 billion bridge loan provided by J.P. Morgan Chase to fund the transaction and a cash payment of up to $25 billion, as AT&T will not assume any of T-Mobile’s debt or liabilities. Deutsche Telekom will receive an 8 percent ownership stake in the newly combined entity, with a DT representative joining the Board of Directors.

AT&T will also retain T-Mobile’s Bellvue, Washington headquarters for the immediate future with major changes changes to staffing levels yet to be confirmed. Should the purchase fail to receive the proper regulatory approval, AT&T will be required to pay $3 billion to T-Mobile and divest itself of the acquired AWS spectrum.

For its part, Deutsche Telekom has issued its own press release regarding the purchase and has confirmed the $25 billion in cash and $14 billion in stock that it expects to receive from AT&T in exchange for the 8 percent equity/ownership stake in the new company. The purchase and integration of both companies is expected to last an entire year from today’s announcement, provided it receives the required regulatory approval. Read More for the expanded LTE rollout planned in the wake of the purchase utilizing T-Mobile’s AWS spectrum.