AT&T Proposes Merger With T-Mobile

The telecom sector of the US economy is a hive of merger and acquisition activity that investors are no doubt following with intense interest. The latest activity to hit the news is the planned $39 billion merger between AT&T (NYSE: T)and T-Mobile USA. This development threw a spanner in the works for Sprint Nextel’s investors who had been anticipating positive results from the recent merger talks between Sprint and the German mobile telecom provider T-Mobile. Should the proposed AT&T/T-Mobile merger meet with the approval of regulatory authorities, the combined company will have in the region of 130 million subscribers, becoming the largest mobile carrier in the United States – a position which is currently held by Verizon.

It is estimated that the proposed AT&T/T-Mobile merger will take up to a year to conclude. However, the fact the two mobile telecom service provider’s networks are compatible means that the integrating of the two networks is likely to be relatively hassle-free. This may have been one of the deciding factors in T-Mobiles decision to abandon talks with Sprint and go with AT&T instead.

T-Mobile has been losing customers (mainly to Sprint) in recent months, but the feeling is that these customers may be persuaded to return to T-Mobile once its position has been reinforced by AT&T. The outlook for Sprint seems bleak, especially in light of the setback it suffered when merging with Nextel in a deal which has been dubbed as one of the worst and costliest deals in the history of telecom. It has been suggested that the vulnerable position of Sprint could make it a takeover target. Other options that are being bandied about include the possibility of some sort of deal with Leap Wireless and PCS, both of which have seen an increase in share value in the past few days.

AT&T management has expressed confidence that, with the broader network infrastructure and increase in cell-tower density brought about by the combining of resources, the merger will result in service improvements to its customers. While finalizing a merger may still take some time, Senators Susan Collins and Olympia Snow have appealed to AT&T to consider the approximately 800 T-Mobile employees based at its call centre in central Maine, and to keep them informed as to the deal’s progress.