AT&T announced it will buy T-Mobile USA, the nation's fourth largest carrier from Deutsche Telekom, pending regulatory approval. The merger would push AT&T, the nation's second largest wireless carrier, ahead of first place Verizon, giving the combined company 129 million subscribers compared to Verizon's 102 million subscribers.
AT&T said merging the two companies would result in $40 billion in savings, more than the amount it has agreed to pay for T-Mobile. Some of those savings will come from cutting jobs, many of which could be at T-Mobile USA's Bellevue headquarters where the company has more than 3000 employees.
The move would be a blow to Seattle's position as a wireless Mecca. Seattle is one of the few cities that has great strength in the field thanks to the local presence of wireless carriers (T-Mobile and Clearwire), platform and device developers (Microsoft and HTC) and numerous applications developers. The Seattle area's strong presence in the field could be further weakened if Sprint acquires Clearwire, an operation in which it already holds a majority share.
But some argue that the region will remain the capitol of wireless regardless of what happens because of its concentration of talented workers in the industry. When McCaw sold its wireless operations to AT&T in 1994, many jobs were lost, but AT&T still employs several thousand people in the region. And many of the employees who left McCaw launched new start-ups.
AT&T has agreed to pay $25 billion in cash and an additional $14 billion in shares for T-Mobile USA. Deutsche Telekom will use the money to reduce debt and strengthen its market position in Europe. “We have achieved the best solution for our company, our customers and shareholders," said Deutsche Telekom CEO Rene Obermann in a statement: "We will be able to focus more on the opportunities of a modern infrastructure in Germany and Europe.
Deutsche Telekom also gets to unload a property that has been steadily losing customers. T-Mobile has sought to boost share by cutting its prices. A merger could result in less pricing pressure in the wireless market. If regulators determine that the move would result in a duopoly and higher prices, they could choose to block the deal.
The deal would give AT&T much needed capacity at a time when the growing use of smart phones is straining its systems. AT&T said it has seen its mobile data traffic grow by 8,000 percent in the past four years. The company expects it to grow another 800 to 1000 percent by 2015. "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," the company said.