US mobile firms to combine in $39bn deal

Two of the four largest mobile phone operators in the US last night unveiled an audacious plan to combine, in a direct challenge to competition authorities who have already expressed concern that consumers may not always be getting a fair deal.

AT&T said it would pay $39bn (£24bn) in cash and stock to buyT-Mobile USA from Deutsche Telekom of Germany. The deal would leapfrog AT&T into the top spot in terms of US subscribers, with over one-third more customers than the current No 1, Verizon Wireless, which is 50 per cent-owned by Vodafone of the UK.

"This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation's future," Randall Stephenson, AT&T's chief executive, said. "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."

The US industry regulator, the Federal Communications Commission, signalled in its most recent annual report that it was unhappy with the developing competitive landscape.

In an age where wireless networks are used not only for telephone calls but also for accessing the internet and using software applications downloaded to smartphones, the FCC said it no longer believed the industry was "effectively competitive".

The deal adds T-Mobile USA's 33.7 million customers to the 129 million already served by AT&T, and brings much-needed additional wireless spectrum. AT&T executives have been worried about capacity constraints amid widening data use by its customers.

The company went out of its way last night to pre-empt critics of the deal, saying the US has one of the most fiercely competitive wireless markets in the world.

Under the terms of the deal, Deutsche Telekom will receive up to $29.2bn in cash, with the rest in AT&T stock, leaving the German giant with a stake of between 5 per cent and 8 per cent of the US company.