AT&T has agreed to acquire T-Mobile USA from Deutsche Telekom in a $39 billion deal that would create the largest US cell carrier but that may create headaches for the Obama administration.
AT&T says the deal wil add about 46.5 million Americans to its 4G Long Term Evolution network, making for better connections and bringing fast service to 95 percent of the country. But consumer advocates worried that the new giant company could raise prices and worsen service. The boards of both companies have approved the deal, but it must be approved by the Federal Communications Commission and the Department of Justice.
"The Obama Administration wants to be seen as pro-business and is on the record is seeking better access to Internet and mobile connections for rural Americans -- but will be under pressure to keep the industry competitive and prices down..
"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," the companies said in a joint statement..
“This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation’s future,” said Randall Stephenson, chairman and CEO of AT&T.
"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," the statement says. "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."
The statement says that Americans still have other wireless providers to choose from.
"The U.S. wireless industry is one of the most fiercely competitive markets in the world and will remain so after this deal," it reads.
But the arrangement leaves just two other major wireless telephone carriers for the U.S. market -- Verizon and Sprint.
Consumer groups immediately complained. Gigi Sohn of the digital consumer group Public Knowledge called the takeover "unthinkable."
"The wireless market, now dominated by four big companies, would have only three at the top. We know the results of arrangements like this -- higher prices, fewer choices, less innovation," Sohn said in a statement. "The fact that AT&T and T-Mobile would even think of such a combination shows how desperately the U.S. needs both strong network neutrality rules and a competition policy that requires dominant broadband providers to make their networks available to competitors."
"There is nothing about having less competition that will benefit wireless consumers. And if regulators approve this deal, they will further cement duopoly control over the wireless market by AT&T and Verizon," agreed Derek Turner of the media reform group Free Press. “A market this concentrated -- where the top four companies already control 90 percent of the business, and two of them want to merge -- means nothing but higher prices and fewer choices, as the newly engorged AT&T and Verizon exert even more control over the wireless Internet."
As part of the deal, Deutsche Telekom gets an 8 percent equity stake in AT&T and a seat on its board of directors.
Josh Smith contributed contributed to this article.