AT&T Purchases T-Mobile USA for US$39 Billion

Earlier this afternoon, AT&T and Deutsche Telekom AG announced that AT&T will be purchasing T-Mobile USA in a US$ 39 billion deal that includes both cash and stock. Undoubtedly, there will be lots of talk about how the deal improves profitability for AT&T, as well as service and access to advanced technologies for the customers of both telecom firms (T-Mobile has been plugging its 4G network upgrades for several months now). The board of directors for both AT&T and Deutsche Telekom approved the deal, which is sure to make for some happy shareholders if the stock portion of the deal includes a premium (AT&T’s 52-week share price ranges from C$23.44 to C$29.66, while Deutsche Telekom’s ranges from about C$11.88 to C$14.85).

But all of the happy talk, hype, and political discussion (in an acquisition of this size, the regulators are certain to chip in a word or two on the deal) obscures an interesting facet of this acquisition that probably won’t be looked at by many.

Over the past six months, T-Mobile has been really sticking it to AT&T (and more recently, Verizon) in their marketing campaign to co-promote their 4G network and the Google MyTouch handset. From a creative standpoint, the ads aren’t terribly original- very reminiscent of Apple’s “I’m a Mac” campaign that ran from 2006-2009. But the message is pretty clear.

In Q4 2010, T-Mobile added 1% to its service-based revenues (US$4.69 billion total), an additional one million customers, and became the United States’ largest 4G-capable network (as reported by Businesswire on 25 February, 2011). When you post milestones like that in a single fiscal quarter, the big dogs sit up and take notice.

Which brings us to corporate competition 101: if you can’t beat ’em, buy ’em.

T-Mobile MyTouch Ads on YouTube:

You’ll want to watch these sooner, rather than later. They were originally posted to T-Mobile’s YouTube account and needless to say, they aren’t very flattering to AT&T. I’d imagine that the powers that be at AT&T Mobile will want them to go away. Like, yesterday.

 

Disclosure: at time of writing, I did not own an equity position in any of the companies mentioned in this article.

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