AT&T swoops to become biggest cellphone network in the US

In the US Verizon at 93 million will be No 2 and Sprint Nextel No 3. The deal is a big blow to Sprint which had been in talks to combine with T-Mobile in the USA, according to reports in the Wall Street Journal .

Observers say that, as the deal will will cut the number of wireless carriers with national coverage from four to three, it is bound to face close regulatory scrutiny.

Not much will change right away for T-Mobile' s 33.7 million US customers. AT&T expects the deal will take a year to close. When and if it does, T-Mobile will get access to AT&T's mobile phones, including the iPhone.

American commentators thought the new deal would put agency Publicis of Seattle in an awkward position.

The agency is behind T-mobile's current campaign that takes pot shots at AT&T's network. In a spoof of the "PC vs. Mac" ads, the Publicis ads have an attractive woman, representing T-Mobile's service, continuously beating out the iPhone - which is dragged down by carrying a man representing AT&T's often-criticised 3G network.

The public interest group Public Knowledge says that eliminating one of the four national phone carriers is "unthinkable." President Gigi Sohn said in a statement, "We know the results of arrangements like this—higher prices, fewer choices, less innovation."

T-Mobile has cheaper service plans than AT&T, particularly the kind that does not require a two-year contract. AT&T chief Randall Stephenson said one goal was to move T-Mobile customers to smart phones, with higher monthly fees - but AT&T "will look hard" at keeping T-Mobile's no-contract plans, he said.

One big stumbling block stood in the way of a T-Mobile/Sprint deal. The networks of the two companies are incompatible . The same would have been true of a Verizon Wireless-T-Mobile deal. But AT&T and T-Mobile use the same underlying technology, so AT&T phones can largely use T-Mobile's network and vice versa.

With more cell towers across the the country, AT&T- often adversely compared to Verizon in terms of coverage - says its customers will benefit . The network will have 30 percent more capacity, AT&T said.

"It obviously will have a significant impact in terms of dropped calls and network performance," Stephenson said.

To ease the concerns of regulators, AT&T said yesterday (Sunday) it would spend additional $8 billion to expand ultrafast wireless broadband into rural areas. Instead of covering about 80 percent of the U.S. population with its new network, AT&T's new goal is 95 percent. That means adding an area 4.5 times the size of Texas. Construction, however, will take years.