n a surprise announcement, T-Mobile USA has been sold to AT&T for US$39 billion. Although a possible sale of T-Mobile had been rumoured for years, they always envisioned a tie-up with a smaller operator, such as Sprint Nextel, or more recently with Clearwire.
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 8 percent 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 includes as well 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 EUR13 billion (US$18.4 billion) of the proceeds to reduce its debts. Approximately EUR5 billion (US$7.1 billion) are 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. Pro forma the ratio for net debt to adjusted EBITDA in 2010 would have fallen to 1.9x from 2.2x.
| Networks | Customer Base | |
|---|---|---|
| Before Merger | After Merger | |
| AT&T | 95.54 million | 129.27 million |
| Verizon Wireless | 94.14 million | 94.14 million |
| Sprint Nextel | 49.91 million | 49.91 million |
| T-Mobile USA | 33.73 million | - |
| MetroPCS | 8.12 million | 8.12 million |
| US Cellular | 6.07 million | 6.07 million |
| Leap Wireless | 5.52 million | 5.52 million |
| Clearwire | 4.38 million | 4.38 million |
