AT&T to Buy T-Mobile USA for $39 Billion

AT&T has agreed to buy T-Mobile USA from Deutsche Telekom for $39 billion, in a deal that would create the largest wireless carrier in the nation and would reshape the industry.

The transaction, one of the largest since the onset of the financial crisis, is expected to start a fierce battle in Washington as regulators scrutinize the effect of the deal on competition and consumers. The deal would leave just three major cellular companies in the country: AT&T, Verizon and the much smaller Sprint Nextel.

Some critics denounced the merger within hours of its announcement, saying it would most likely lead to higher prices. T-Mobile had offered some of the lowest rates in the country, keeping pressure on competitors. While AT&T is expected to honor current contracts, T-Mobile customers may have to pay higher rates once those contracts expire. Still, AT&T pointed to a recent report from the federal Government Accountability Office that said cellular subscription costs fell 50 percent from 1999 and 2009, a period in which the industry has consolidated.

AT&T customers, though, could benefit in one notable area: service. Both AT&T and T-Mobile operate on the same technology, known as GSM, so the combination should provide better coverage. That has been a sore point for AT&T, which has been ridiculed over dropped calls and slow data services, especially on the Apple iPhone.

The acquisition would give AT&T additional leverage against its main rival, Verizon. The newly combined company, bringing together AT&T’s 95.5 million wireless subscribers with T-Mobile’s 33.7 million customers, would account for roughly 42 percent of all wireless subscribers in the United States. Verizon has around 31 percent, said Charles Golvin, a telecommunications analyst at Forrester Research. T-Mobile customers would have the option to buy an iPhone, helping AT&T combat the migration of the popular device to Verizon.

The deal would also provide significant cost savings, roughly $3 billion a year for the new company. Those savings, however, could have a huge effect on both the local and national economy, from real estate to media. The combined company is expected to close hundreds of retail outlets in areas where they overlap, as well as eliminate overlapping back office, technical and call center staff. It may also drastically reduce advertising spending. Last year, AT&T and T-Mobile spent a combined $2.7 billion on advertising, according to Kantar Media.