AT&T Buys T-Mobile, Deprives Desperate Sprint

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Just days after rumors that Sprint-Nextel (NYSE: S) and T-Mobile would merge, AT&T (NYSE: T) bought the Deutsche Telekcom US division of $39 billion. The deal dashes Sprint’s hopes to challenge AT&T Wireless and Verizon Wireless. DT and AT&T said “they have entered into a definitive agreement under which AT&T will acquire T-Mobile USA from Deutsche Telekom in a cash-and-stock transaction currently valued at about $39 billion. The agreement has been approved by the Boards of Directors of both companies.” Of the total $25 billion will be paid in cash. 24/7 Wall St. recently predicted that T-Mobile would be gone soon when it released its “Ten Brands That Will Disappear in 2011” last June.

AT&T said the transaction would expand its LTE 4-G footprint.

“The number of AT&T shares issued will be based on the AT&T share price during the 30-day period prior to closing, subject to a 7.5 percent collar; there is a one-year lock-up period during which Deutsche Telekom cannot sell shares.”

AT&T Wireless has 93 million subscribers to Verizon Wireless’s 94 million. T-Mobile has 34 million and Sprint 50 million.

The deal leaves the troubled Sprint without a way to escape from its lingering problems. It has lost subscribers in most quarters over the last three years. It has also lost money over the majority of that time. Sprint does not have the leverage to attract Apple’s (NASDAQ: AAPL) iPhone 4 or iPad 2 products which means millions of customers will never chose it as a carrier.

Sprint depends on WiMax 4G which it has built out along with provider Clearwire (NASDAQ: CLWR). AT&T can cement its LTE 4G standard with the T-Mobile deal. Verizon Wireless also used LTE.

Sprint’s situation has gone from troubled to desperate.

Douglas A. McIntyre