US telco AT&T announced yesterday that it has agreed to acquire mobile operator T-Mobile USA, a subsidiary of German incumbent Deutsche Telekom, for US$39bn. The move comes after weeks of speculation that T-Mobile USA was planning a merger deal with…
US telco AT&T announced yesterday that it has agreed to acquire mobile operator T-Mobile USA, a subsidiary of German incumbent Deutsche Telekom, for US$39bn.
The move comes after weeks of speculation that T-Mobile USA was planning a merger deal with third-placed US mobile operator Sprint Nextel.
AT&T’s US$39bn payment is comprised of US$25bn of cash, with the rest coming in the form of AT&T shares. AT&T has the option to increase the purchase price by US$4.2bn, with a corresponding decrease in the stock amount.
Deutsche Telekom will hold an 8% equity stake in AT&T after the transaction has been completed. It will also have one seat on the AT&T board.
The acquisition is still subject to US regulatory approval. Regulators will inevitably be looking at the competition issues regarding this deal (see separate article), as AT&T is already the largest mobile operator in the US by subscribers.
AT&T said that the deal is expected to close in approximately twelve months, while Deutsche Telekom said that it anticipated the deal closing in the first half of 2012.
AT&T was advised by Evercore Partners, Greenhill & Co, and JP Morgan. Its legal advisers were Arnold & Porter, Crowell & Moring, and Sullivan & Cromwell LLP.
Morgan Stanley was the lead financial adviser for Deutsche Telekom, which was also advised by Credit Suisse and Deutsche Bank on the deal.
Deutsche Telekom’s legal advisers were Cleary Gottlieb and Wiley Rein, as well as Wachtell, Lipton, Rosen & Katz.
Deutsche Telekom said that the deal represented 7x the 2010 adjusted EBITDA for T-Mobile USA.
Despite the high price, AT&T seems confident that it has achieved a good deal. It said that it believed the synergies achieved through the acquisition would eventually be worth more than the purchase price of US$39bn.
Reuters reported today that AT&T’s chairman, Randall Stephenson, had made the first approach to Deutsche Telekom about a potential deal in December 2010.
This had reportedly led to a handshake agreement between the two companies one week ago.
Stephenson said in a statement yesterday that the transaction would deliver significant benefits for customers, shareholders and the wider public.
He said: “We are confident in our ability to execute a seamless transition, and with additional spectrum and network capabilities, we can better meet our customers’s current demands, build for the future and help achieve the President’s goals for a high-speed, wirelessly-connected America.”
AT&T is paying a high price for T-Mobile USA, but this price still represents a loss for Deutsche Telekom from its original acquisition of the assets.
It paid over US$50bn in 2000 for the Voicestream mobile business, which subsequently became T-Mobile USA.
