AT&T (NYSE:T) announced on Sunday that it will buy T-Mobile USA from Deutsche Telekom AG in a cash-and-stock deal worth $39 billion.
The deal joining the second-largest North American wireless operator by subscribers with the fourth-largest would create a combined entity about one third larger than the current market leader, Verizon Communications Inc., (VZ) and twice as large as Sprint Nextel Corp. (S).
The purchase includes a cash payout of $25 billion, with the remainder to be covered with AT&T common stock. AT&T can hike the cash part of the purchase by up to $4.2 billion, the statement said.
Terms of the deal also give Deutsche Telekom a roughly 8% stake in AT&T, and a Deutsche Telekom representative will join AT&T's board.
AT&T expects the acquisition to take a year to close. For T-Mobile's subscribers, the news will not immediately change anything.
AT&T has a potential upside of 14.1% based on a current price of $27.94 and an average consensus analyst price target of $31.88.