Despite speculation that telecommunications company Sprint was poised to purchase T-Mobile, news came yesterday that instead AT&T would purchase T-Mobile from Deutsche Telekom. The price is reported to be $39 billion.

The acquisition means that there will soon be only three major cell phone companies in the U.S. Sprint, without T-Mobile, will be a distant third place, second place will be Verizon, and leading the pack will be an even bigger AT&T. Regulators will be looking at the deal and its antitrust implications.

Critics of the deal predict it will result in higher prices for consumers. T-Mobile's prices had been lower than its competitors. Once the T-Mobile contracts with its customers expire, higher prices could be coming for those customers.

AT&T said that the trend is for cell subscription prices to go down, as they did between 1999 and 2009, just as the industry was going through a period of consolidation.

One way AT&T customers are likely to benefit is in better coverage. T-Mobile and AT&T use the same GSM technology, so the merger should be an easy one technologically. AT&T has had serious problems with slow service and dropped calls, especially on iPhones.

A combined AT&T and T-Mobile would have around 42% of all wireless subscribers in the U.S. Verizon has around 31%.

It is also estimated that the new company would save three billion dollars a year. Many local stores would probably be closed where the separate companies' markets overlap. Management, technical staff, call center staff and advertising will likely be cut back to reduce redundancy. San Diego mergers and acquisitions attorneys noted that the two companies spent nearly three billion dollars on advertising last year alone.

Source: New York Times Dealb%k "AT&T to Buy T-Mobile USA for $39 Billion" 3/20/2011