AT&T rocked the US wireless industry on Sunday with its announcement that it would purchase rival T-Mobile USA for $39 billion in cash and stock. News of the deal came as a surprise to industry watchers who had speculated for weeks about a possible merger between Sprint Nextel and T-Mobile, ranked respectively as the third- and fourth-largest wireless firms in the U.S. If approved, the merger would catapult AT&T past Verizon Wireless as the top mobile phone provider in the nation with command of nearly 130 million customers and a hefty 43% share of the U.S. wireless market. By comparison, Verizon—the current leader among the four national wireless carriers—would drop to second place with 101 million subscribers and a 31% share of the market, leaving Sprint a distant third with 50 million customers that comprise a 17% market share. In remarks to reporters, AT&T CEO Randall Stephenson noted that the key driver behind the transaction is the need for spectrum that would form the basis of AT&T’s expansion into fourth-generation wireless broadband services. Touting the companies’ “complementary network technologies, spectrum positions and operations,” Stephenson proclaimed that the deal “provides a fast, efficient and certain solution to the impending exhaustion of wireless spectrum in some markets, which limits both companies’ ability to meet ongoing explosive demand for mobile broadband.” The transaction would also sharply reduce the U.S. market role of Germany’s Deutsche Telekom (DT), which formed T-Mobile USA out of its $35 billion acquisition of VoiceStream Wireless in 2001. Under the deal, DT would receive a cash payment of $25 billion and shares of AT&T stock currently valued at $14 billion. DT would also emerge with an 8% equity stake in AT&T and a seat on the company’s board. The agreement also allows AT&T to exercise the right to substitute an additional $4.2 billion in cash for some of the stock component, which would dilute DT’s holding to as little as 5%. Citing the potential of the transaction to conserve scarce spectrum resources, the role that the combined entity would play in expanding broadband to 95% of Americans, and the notion that “the majority of Americans have the option of five different wireless carriers,” Stephenson expressed confidence that the deal will win regulatory approval.