Gabelli Comments On AT&T Acquisition Of T-Mobile USA

In a report published by Gabelli, AT&T T agreed to acquire T-Mobile USA (the 4th-largest mobile operator in the U.S., with 33.7 mil. customers) on Sunday from Deutsche Telekom in a cash-and-stock transaction, valued at ~$39 billion (or ~7.1x 2010A EBITDA), consisting of $25 billion in cash and up to $14 billion in AT&T stock. Gabelli said that this transaction should enhance AT&T's spectrum and network position, improve business mix, generate significant synergies, and could lead to more rational pricing / competitive environment in the wireless industry. “Transaction is expected to close in ~12 months. It is subject to customary regulatory (including DOJ and FCC) and closing conditions. Obtaining regulatory approvals might become challenging for AT&T, as the combined company will have ~129 mil. wireless subscribers (~42% market share) and a large spectrum position. It is possible, that some market divestitures would be required by the regulators. AT&T noted that with this transaction it voluntarily commits to a significant expansion of robust 4G LTE deployment to 95 percent of the U.S. population (to reach an additional 46.5 million people beyond current plans – including rural communities and small towns).” AT&T closed yesterday at $27.94.