AT&T acquires T-Mobile USA in US$39 billion deal

T-Mobile USA has been sold to AT&T for US$39 billion in a transaction that took the market by surprise. Although a possible sale of T-Mobile had been rumoured for years, AT&T had not factored into the list of potential candidates.

Under the terms of the deal, Deutsche Telekom will receive US$25 billion in cash and US$14 billion in AT&T shares. As structured, Deutsche Telekom will become the largest minority shareholder in AT&T with an eight per cent stake. However, AT&T has the right to increase the portion of the purchase price paid in cash by up to US$4.2 billion with a corresponding reduction in the shares component.

The agreement between the two companies also includes that Deutsche Telekom is to receive one seat on the board of AT&T.

T-Mobile USA is valued at seven times the adjusted EBITDA of the business year 2010 in this transaction.

The merger still needs to be approved by both, the US Department of Justice (DoJ) and the US regulation authority Federal Communications Commission (FCC). The closing of the transaction is expected to take place in the first six months of 2012.

After the closing of the transaction Deutsche Telekom plans to use approximately €13 billion (US$18.4 billion) of the proceeds to reduce its debts. Approximately €5 billion is planned to be used for share buybacks after closing and required resolutions in accordance with the legal requirements. For Deutsche Telekom this transaction leads to a further consolidation of the balance sheet.