Deutsche Telekom has been looking at radical moves to let it get more value out of its U.S. holding, including a possible combination with a U.S. partner.
There was a big hurdle to a T-Mobile USA-Sprint deal: The two companies use incompatible network technologies. The same hurdle would apply in a Verizon Wireless-T-Mobile USA deal. But the networks of AT&T and T-Mobile use the same underlying technology, so to some large extent, AT&T phones can already use T-Mobile’s network, and vice versa.
The deal has been approved by the boards of both companies. Dallas-based AT&T can increase its cash portion by up to $4.2 billion, with a reduction in the stock component, as long as Deutsche Telekom receives at least a 5 percent equity ownership interest in the buyer.
The agreement doesn’t leave room for other buyers to jump in with a higher bid, AT&T said.
AT&T would finance the cash part of the deal with new debt and cash on its balance sheet and will assume no debt from T-Mobile.
AP Technology Writer Joelle Tessler contributed to this report from Washington, D.C.