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Originally published March 20, 2011 at 9:08 PM | Page modified March 21, 2011 at 2:25 PM

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T-Mobile-AT&T deal reshapes wireless industry

The last major wireless company based in the Seattle area, T-Mobile USA, will be sold to AT&T for $39 billion in a massive deal that reshapes the wireless industry as it begins delivering fast new services and more connected devices.

Seattle Times senior technology reporter

T-Mobile USA

Headquarters: Bellevue

CEO: Philipp Humm

Parent company: Deutsche Telekom, based in Bonn, Germany

2010 sales: $21.3 billion

Employees: 42,000, estimated 3,300 in Seattle area

Lineage: Emerged out of VoiceStream Wireless, a spinoff of Bellevue-based Western Wireless. Deutsche Telekom acquired VoiceStream for about $29 billion, finalizing the deal in 2001. DT, which operates a family of T-Mobile companies across the world, renamed the unit T-Mobile USA.

Subscribers: 33.7 million at end of fourth quarter

Technology: Operates on GSM platform; uses 4G HSPA+ technology

Stores: About 2,050

Sources: T-Mobile USA,

Seattle Times files

AT&T

Headquarters: Dallas

CEO: Randall Stephenson

2010 sales: $124.3 billion (wireless segment accounted for 47 percent, or about $58.4 billion)

Employees: 267,000 worldwide, estimated 4,500 in Seattle area

Lineage: AT&T acquired Redmond-based McCaw Cellular Communications in 1994 and renamed it AT&T Wireless. Cingular Wireless, a joint operation of SBC Communications and BellSouth, acquired AT&T Wireless in 2004. SBC then acquired AT&T, taking that company's name, and later also acquired BellSouth. Cingular then was re-branded AT&T.

Subscribers: 95.5 million at end of fourth quarter

Technology: Operates on GSM platform; uses 4G HSPA+ technology, while moving toward LTE 4G platform

Stores: 2,200 company-owned stores, plus numerous distributor relationships with other retailers

Sources: AT&T,

Seattle Times files

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The last major wireless company based in the Seattle area, T-Mobile USA, will be sold to AT&T for $39 billion in a massive deal that reshapes the wireless industry as it begins delivering fast new services and more connected devices.

The surprise announcement Sunday came after months of rumors about Bellevue-based T-Mobile, the fourth-largest carrier and a subsidiary of Germany's Deutsche Telekom. Lacking a clear, long-term plan for next-generation wireless technology, T-Mobile had to invest heavily in its network, partner with a larger company or find a buyer.

If regulators approve the deal, AT&T could have a combined 130 million subscribers, making it the nation's largest wireless carrier by a significant margin, leapfrogging Verizon Wireless and extending its upcoming mobile broadband network to 95 percent of the U.S. population.

Until the deal closes, expected next year, customers of T-Mobile and AT&T should be relatively unaffected. And no, T-Mobile isn't getting the Apple iPhone just yet.

The long-term fate of T-Mobile employees is unclear, but AT&T pledged to maintain a large footprint in the Seattle area, where the U.S. wireless industry was spawned. A spokesman said AT&T will keep its headquarters in Dallas, but "we plan to maintain a significant presence in Seattle."

Still, the sale may be seen as another blow for a region that has lost large corporate headquarters — and high-paying management positions — in recent years, including those of Boeing, Safeco and Washington Mutual.

There was speculation in recent weeks that T-Mobile — the fourth-place carrier — would merge with third-place Sprint and perhaps Kirkland-based Clearwire, improving Sprint's position against the largest two carriers, AT&T and Verizon.

Instead, AT&T is bulking up for its intensifying competition with Verizon, buying T-Mobile from parent Deutsche Telekom for $25 billion in cash and $14 billion in stock.

Deutsche Telekom would end up as AT&T's largest shareholder, with 8 percent of the company.

AT&T said it will use T-Mobile's spectrum and tower network to improve the quality of its service, a sore point since it was burdened by heavy data usage of iPhone users starting in 2007.

It also settles for good the question of which "fourth generation" network T-Mobile will pursue, since its customers will have access to the LTE technology AT&T is developing.

"This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation's future," Randall Stephenson, AT&T chairman and chief executive, said in a news release. "It will improve network quality, and it will bring advanced LTE capabilities to more than 294 million people."

Deutsche Telekom plans to use the proceeds to pay down debt and build up its position in Europe.

"We have achieved the best solution for our company, our customers and shareholders," CEO Rene Obermann said in a news release. "This will strengthen our position in Europe, whilst we are still participating in the rapidly growing business of mobile data."

T-Mobile and AT&T were already distant cousins. AT&T descended from the McCaw family cellular-phone companies formed in the 1980s. T-Mobile was previously VoiceStream Wireless, a company McCaw veteran John Stanton started.

In a deal that closed in 2001, Deutsche Telekom paid about $30 billion for VoiceStream, later changing its name to T-Mobile USA. News of the deal similarly came on a Sunday, in 2000, and was initially valued at $50.7 billion but fell in value before it closed in 2001.

Together, AT&T and T-Mobile employ nearly 8,000 people on the Eastside, but the overlapping administrative positions mean some cuts are likely, not to mention duplicate retail stores operated across the country.

AT&T didn't specify what will happen to T-Mobile employees, but its news release implies it intends to maintain T-Mobile staff and its large concentration of employees in the Seattle area.

An AT&T spokesman said the company is developing its "synergy plan," but the deal is intended to spur growth and create more opportunities for employees.

"We share similar spectrum so there's a lot of positive knowledge we're looking forward to tapping into," he said. "Any reduction we anticipate will come through natural attrition.'

By acquiring T-Mobile, AT&T will see its effort to expand its network capacity leap ahead. It also means customers of the combined company will have access to both the current 3G network and AT&T's new ultrafast fourth-generation LTE network as it comes online.

Under the deal, AT&T is acquiring 33.7 million T-Mobile customers, T-Mobile's wireless spectrum and T-Mobile's collection of cell sites.

AT&T's market share will jump from about 33 percent to 43 percent with T-Mobile folded in. Verizon has around 35 percent of the wireless market.

One obstacle to the deal may be winning regulatory approval. The companies may be forced to divest markets, letting go some subscribers, to obtain approval, industry consultant Chetan Sharma said.

"I don't see them approving as is," he said, predicting that "it will be a long, drawn process in terms of analysis to see if this makes it less or more competitive."

Lawmakers, including Sen. Herb Kohl, D-Wis., head of the Senate Judiciary antitrust subcommittee, said the group would scrutinize the deal for potential impact on consumer prices and service.

AT&T is apparently anticipating the scrutiny. In its release, it asserted that market competition is "escalating" and consumers have multiple wireless options:

AT&T said customers of both companies "will see service improvements — including improved voice quality — as a result of additional spectrum, increased cell tower density and broader network infrastructure. At closing, AT&T will immediately gain cell sites equivalent to what would have taken on average five years to build without the transaction, and double that in some markets."

In an advisory note on its site, T-Mobile said customers will see no changes in service or rates until after the deal closes. T-Mobile phones will continue to work, and the company said it will honor multiyear contracts that extend beyond the takeover.

Information on congressional scrutiny of the deal from

The Washington Post.

Brier Dudley: 206-515-5687 or bdudley@seattletimes.com

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