AT&T would pay $39 billion for rival

Telephone bills, which contain information for an AT&T customer, lie in a pile May 12, 2006 in Chicago, Illinois.

ADRIENE HILL: AT&T wants to swallow up T-Mobile. The $39 billion deal would create the largest cell phone company in the U.S. Marketplace's David Gura has been following the news this morning and joins us live. Good morning David.

DAVID GURA: Hey Adriene.

HILL: So, why is AT&T making this deal now?

GURA: AT&T would become the largest wireless provider in the U.S., with around 130 million customers. Obviously that's a lot of phone bills.

I talked to Christopher King. He follows the wireless industry for Stiffel Nicolaus. He said there are a lotta reasons why this deal makes sense.

CHRISTOPHER KING: They can, you know, consolidate everything from cell towers to spectrum to handset purchases to, you know, sales and marketing staffs.

And Adrienne, that means there could be significant cost savings to AT&T, and potentially, to you and me.

HILL: And that's what I'm interested in. I'm a former AT&T customer, who switched to T-Mobile -- what's this going to mean for me and other T-Mobile customers?

GURA: Well, you'd have more choices. I know you've got a Droid. You could trade that in for an iPhone, if you wanted to. And AT&T says its new network will be a lot bigger.And faster. But there are critics who say, do we really want more consolidation? There are plenty of people who associate AT&T with slow service and dropped calls. And they're worried that, if the market continues to shrink, say, if Verizon Wireless decided to buy Sprint-Nextel, there'd be even less competition. And that could make service more expensive. Now AT&T needs approval from the Justice Department and the Federal Communications Commission, and as every analyst I talked to said, Adriene, those are two big hurdles it'll have to overcome.

HILL: David Gura, in Washington. Thanks David.

GURA: Thank you.

HILL: Our sister show, the Marketplace Tech Report, has more about the story at Marketplace.org.


TEXT OF ORIGINAL STORY

STEVE CHIOTAKIS: AT&T says it's buying fellow wireless provider T-Mobile USA -- a deal that's worth about $40 billion. Together, the two would become the nation's biggest wireless carrier.

Marketplace's David Gura now with how the deal shows how different the cell phone market is today.


DAVID GURA: Germany's Deutsche Telekom bought into the U.S. market a decade ago, when the wireless industry was growing rapidly. But ten years later, it's dominated by two major players, and the Germans decided to cash in their chips.

If the deal is approved, Deutsche Telekom would get an eight-percent ownership stake in AT&T and a seat on the company's board.

The Justice Department and the Federal Communications Commission both have to approve this deal. The new AT&T would have around 130 million customers, and there's concern that a market with three wireless providers could get even smaller, if say, Verizon Wireless decided to buy Sprint-Nextel. Analyst Christopher King, with Stifel Nicolaus, says that makes people wonder about what could happen to their cell phone bills.

Christopher King: There are going to be significant questions raised over the course of the next couple of days about this deal and whether it can go through or not.

If it does, costs could go down. Service -- especially in rural areas -- could get better, with a more-modern network. And current T-Mobile customers would have more options, including the iPhone.

In Washington, I'm David Gura, for Marketplace.

About the author

David Gura is a reporter for Marketplace, based in the Washington, D.C. bureau.

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