AT&T Inc. (NYSE: T) and Deutsche Telekom AG (FWB: DTE) today
announced that they have entered into a definitive agreement under
which AT&T will acquire T-Mobile USA from Deutsche Telekom in a
cash-and-stock transaction currently valued at approximately $39
billion. The agreement has been approved by the Boards of Directors
of both companies.
AT&T’s acquisition of T-Mobile USA provides an optimal
combination of network assets to add capacity sooner than any
alternative, and it provides an opportunity to improve network
quality in the near term for both companies’ customers. In
addition, it provides a fast, efficient and certain solution to the
impending exhaustion of wireless spectrum in some markets, which
limits both companies’ ability to meet the ongoing explosive demand
for mobile broadband.
With this transaction, AT&T commits to a significant
expansion of robust 4G LTE (Long Term Evolution) deployment to 95
percent of the U.S. population to reach an additional 46.5 million
Americans beyond current plans – including rural communities and
small towns. This helps achieve the Federal Communications
Commission (FCC) and President Obama’s goals to connect “every part
of America to the digital age.” T-Mobile USA does not have a clear
path to delivering LTE.
“This transaction represents a major commitment to strengthen
and expand critical infrastructure for our nation’s future,” said
Randall Stephenson, AT&T Chairman and CEO. “It will improve
network quality, and it will bring advanced LTE capabilities to
more than 294 million people. Mobile broadband networks drive
economic opportunity everywhere, and they enable the expanding
high-tech ecosystem that includes device makers, cloud and content
providers, app developers, customers, and more. During the past few
years, America’s high-tech industry has delivered innovation at
unprecedented speed, and this combination will accelerate its
continued growth.”
Stephenson continued, “This transaction delivers significant
customer, shareowner and public benefits that are available at this
level only from the combination of these two companies with
complementary network technologies, spectrum positions and
operations. We are confident in our ability to execute a seamless
integration, and with additional spectrum and network capabilities,
we can better meet our customers’ current demands, build for the
future and help achieve the President’s goals for a high-speed,
wirelessly connected America.”
Deutsche Telekom Chairman and CEO René Obermann said, “After
evaluating strategic options for T-Mobile USA, I am confident that
AT&T is the best partner for our customers, shareholders and
the mobile broadband ecosystem. Our common network technology makes
this a logical combination and provides an efficient path to
gaining the spectrum and network assets needed to provide T-Mobile
customers with 4G LTE and the best devices. Also, the transaction
returns significant value to Deutsche Telekom shareholders and
allows us to retain exposure to the U.S. market.”
As part of the transaction, Deutsche Telekom will receive an
equity stake in AT&T that, based on the terms of the agreement,
would give Deutsche Telekom an ownership interest in AT&T of
approximately 8 percent. A Deutsche Telekom representative will
join the AT&T Board of Directors.
Competition and Pricing
The U.S. wireless industry is one of the most fiercely
competitive markets in the world and will remain so after this
deal. The U.S. is one of the few countries in the world where a
large majority of consumers can choose from five or more wireless
providers in their local market. For example, in 18 of the top 20
U.S. local markets, there are five or more providers. Local market
competition is escalating among larger carriers, low-cost carriers
and several regional wireless players with nationwide service
plans. This intense competition is only increasing with the
build-out of new 4G networks and the emergence of new market
entrants.
The competitiveness of the market has directly benefited
consumers. A 2010 report from the U.S. General Accounting Office
(GAO) states the overall average price (adjusted for inflation) for
wireless services declined 50 percent from 1999 to 2009, during a
period which saw five major wireless mergers.
Addresses wireless spectrum challenges facing AT&T,
T-Mobile USA, their customers, and U.S. policymakers
This transaction quickly provides the spectrum and network
efficiencies necessary for AT&T to address impending spectrum
exhaust in key markets driven by the exponential growth in mobile
broadband traffic on its network. AT&T’s mobile data traffic
grew 8,000 percent over the past four years and by 2015 it is
expected to be eight to 10 times what it was in 2010. Put another
way, all of the mobile traffic volume AT&T carried during 2010
is estimated to be carried in just the first six to seven weeks of
2015. Because AT&T has led the U.S. in smartphones, tablets and
e-readers – and as a result, mobile broadband – it requires
additional spectrum before new spectrum will become available. In
the long term, the entire industry will need additional spectrum to
address the explosive growth in demand for mobile broadband.
Improves service quality for U.S. wireless customers
AT&T and T-Mobile USA customers will see service
improvements - including improved voice quality - as a result of
additional spectrum, increased cell tower density and broader
network infrastructure. At closing, AT&T will immediately gain
cell sites equivalent to what would have taken on average five
years to build without the transaction, and double that in some
markets. The combination will increase AT&T’s network density
by approximately 30 percent in some of its most populated areas,
while avoiding the need to construct additional cell towers. This
transaction will increase spectrum efficiency to increase capacity
and output, which not only improves service, but is also the best
way to ensure competitive prices and services in a market where
demand is extremely high and spectrum is in short supply.
Expands 4G LTE deployment to 95 percent of U.S. population –
urban and rural areas
This transaction will directly benefit an additional 46.5
million Americans – equivalent to the combined populations of the
states of New York and Texas – who will, as a result of this
combination, have access to AT&T’s latest 4G LTE technology. In
terms of area covered, the transaction enables 4G LTE deployment to
an additional 1.2 million square miles, equivalent to 4.5 times the
size of the state of Texas. Rural and smaller communities will
substantially benefit from the expansion of 4G LTE deployment,
increasing the competitiveness of the businesses and entrepreneurs
in these areas.
Increases AT&T’s investment in the U.S.
The acquisition will increase AT&T’s infrastructure
investment in the U.S. by more than $8 billion over seven years.
Expansion of AT&T’s 4G LTE network is an important foundation
for the next wave of innovation and growth in mobile broadband,
ensuring the U.S. continues to lead the world in wireless
technology and availability. It makes T-Mobile USA, currently a
German-owned U.S. telecom network, part of a U.S.-based
company.
An impressive, combined workforce
Bringing AT&T and T-Mobile USA together will create an
impressive workforce that is best positioned to compete in today’s
global economy. Post-closing, AT&T intends to tap into the
significant knowledge and expertise held by employees of both
AT&T and T-Mobile USA to succeed. AT&T is the only major
U.S. wireless company with a union workforce, offering leading
wages, benefits, training and development for employees. The
combined company will continue to have a strong employee and
operations base in the Seattle area.
Consistent with AT&T’s track record of value-enhancing
acquisitions
AT&T has a strong track record of executing value-enhancing
acquisitions and expects to create substantial value for
shareholders through large, straightforward synergies with a run
rate of more than $3 billion, three years after closing onward
(excluding integration costs). The value of the synergies is
expected to exceed the purchase price of $39 billion. Revenue
synergies come from opportunities to increase smartphone
penetration and data average revenue per user, with cost savings
coming from network efficiencies, subscriber and support savings,
reduced churn and avoided capital and spectrum expenditures.
The transaction will enhance margin potential and improve the
company’s long-term revenue growth potential as it benefits from a
more robust mobile broadband platform for new services.
Additional financial information
The $39 billion purchase price will include a cash payment of
$25 billion with the balance to be paid using AT&T common
stock, subject to adjustment. AT&T has the right to increase
the cash portion of the purchase price by up to $4.2 billion with a
corresponding reduction in the stock component, so long as Deutsche
Telekom receives at least a 5 percent equity ownership interest in
AT&T.
The number of AT&T shares issued will be based on the
AT&T share price during the 30-day period prior to closing,
subject to a 7.5 percent collar; there is a one-year lock-up period
during which Deutsche Telekom cannot sell shares.
The cash portion of the purchase price will be financed with new
debt and cash on AT&T’s balance sheet. AT&T has an 18-month
commitment for a one-year unsecured bridge term facility
underwritten by J.P. Morgan for $20 billion. AT&T assumes no
debt from T-Mobile USA or Deutsche Telekom and continues to have a
strong balance sheet.
The transaction is expected to be earnings (excluding non-cash
amortization and integration costs) accretive in the third year
after closing. Pro-forma for 2010, this transaction increases
AT&T’s total wireless revenues from $58.5 billion to nearly $80
billion, and increases the percentage of AT&T’s total revenues
from wireless, wireline data and managed services to approximately
80 percent.
This transaction will allow for sufficient cash flow to support
AT&T’s dividend. AT&T has increased its dividend for 27
consecutive years, a matter decided by AT&T’s Board of
Directors.
Conditions
The acquisition is subject to regulatory approvals, a reverse
breakup fee in certain circumstances, and other customary
regulatory and other closing conditions. The transaction is
expected to close in approximately 12 months.
Advisors
Greenhill & Co., J.P. Morgan and Evercore Partners acted as
financial advisors and Sullivan & Cromwell LLP, Arnold &
Porter, and Crowell & Moring provided legal advice to
AT&T.
Conference Call/Webcast
On Monday, March 21, 2011, at 8 a.m. ET, AT&T Inc. will host
a live video and audio webcast presentation regarding its
announcement to acquire T-Mobile USA. Links to the webcast and
accompanying documents will be available on AT&T's Investor
Relations website. Please log in 15 minutes ahead of time to test
your browser and register for the call.
For dial-in access, please dial +1 (888) 517-2464 within the
U.S. or +1 (630) 827-6816 outside the U.S. after 7:30 a.m. ET.
Enter passcode 8442095# to join or ask the conference call operator
for the AT&T Investor Relations event.
The webcast will be available for replay on AT&T’s Investor
Relations website on March 21, 2011, starting at 12:30 p.m. ET
through April 21, 2011. An archive of the conference call will also
be available during this time period. To access the recording,
please dial +1 (877) 870-5176 within the U.S. or +1 (858) 384-5517
outside the U.S. and enter reservation code 29362481#.
Transaction Website
For more information on the transaction, including background
information and factsheets, visit www.MobilizeEverything.com.
About AT&T
AT&T Inc. (NYSE:T) is a premier communications holding
company. Its subsidiaries and affiliates – AT&T operating
companies – are the providers of AT&T services in the United
States and around the world. With a powerful array of network
resources that includes the nation’s fastest mobile broadband
network, AT&T is a leading provider of wireless, Wi-Fi, high
speed Internet, voice and cloud-based services. A leader in mobile
broadband and emerging 4G capabilities, AT&T also offers the
best wireless coverage worldwide of any U.S. carrier, offering the
most wireless phones that work in the most countries. It also
offers advanced TV services under the AT&T U-verse® and
AT&T │DIRECTV brands. The company’s suite of IP-based business
communications services is one of the most advanced in the world.
In domestic markets, AT&T Advertising Solutions and AT&T
Interactive are known for their leadership in local search and
advertising.
Additional information about AT&T Inc. and the products and
services provided by AT&T subsidiaries and affiliates is
available at http://www.att.com. This AT&T news release and
other announcements are available at http://www.att.com/newsroom
and as part of an RSS feed at www.att.com/RSS. Or follow our news
at @ATT.
About Deutsche Telekom
Deutsche Telekom is one of the world's leading integrated
telecommunications companies with around 129 million mobile
customers, approximately 36 million fixed-network lines and more
than 16 million broadband lines (as of December 31, 2010). The
Group provides products and services for the fixed network, mobile
communications, the Internet and IPTV for consumers, and ICT
solutions for business customers and corporate customers. Deutsche
Telekom is present in over 50 countries and has around 247,000
employees worldwide. The Group generated revenues of EUR 62.4
billion in the 2010 financial year - more than half of it outside
Germany (as of December 31, 2010).
About T-Mobile USA
Based in Bellevue, Wash., T-Mobile USA, Inc. is the U.S.
wireless operation of Deutsche Telekom AG. By the end of the fourth
quarter of 2010, approximately 129 million mobile customers were
served by the mobile communication segments of the Deutsche Telekom
group - 33.7 million by T-Mobile USA - all via GSM and UMTS, the
world's most widely used digital wireless standards. Today,
T-Mobile operates America's largest 4G network, and is delivering a
compelling 4G experience across a broad lineup of leading devices
in more places than competing 4G services. T-Mobile USA's
innovative wireless products and services empower and enable people
to stay connected and productive while mobile. Multiple independent
research studies continue to rank T-Mobile USA as a leader in
customer care and customer satisfaction. For more information,
please visit http://www.T-Mobile.com. T-Mobile is a federally
registered trademark of Deutsche Telekom AG. For further
information on Deutsche Telekom, please visit
www.telekom.de/investor-relations.
Cautionary Language Concerning Forward-Looking
Statements
Information set forth in this news release contains financial
estimates and other forward-looking statements that are subject to
risks and uncertainties, and actual results may differ materially.
In addition to these factors, there are risks and uncertainties
associated with the T-Mobile business, the pendency of the T-Mobile
acquisition and the ability to realize the benefits of the
integration of the T-Mobile business. A discussion of factors that
may affect future results is contained in AT&T's filings with
the Securities and Exchange Commission. AT&T disclaims any
obligation to update or revise statements contained in this news
release based on new information or otherwise. This news release
may contain certain non-GAAP financial measures. Reconciliations
between the non-GAAP financial measures and the GAAP financial
measures are available on the company's website at
www.att.com/investor.relations.
© 2011 AT&T Intellectual Property. All rights reserved.
Mobile broadband not available in all areas. AT&T, the AT&T
logo and all other marks contained herein are trademarks of
AT&T Intellectual Property and/or AT&T affiliated
companies.
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