NEW YORK (CNN) -- AT&T will acquire T-Mobile USA from telecommunications company Deutsche Telekom for an estimated $39 billion in cash and stock, the companies said in a joint release Sunday.
The new entity would be the biggest in the US, combining AT&T's 95 million customers with T-Mobile's 34 million users for a total of 130 million subscribers.
AT&T (T, Fortune 500) said the transaction would quickly provide "the spectrum and network efficiencies necessary ... to address impending spectrum exhaust in key markets" due to the exponential growth of traffic on its network.
The telecom giant added that it expects to gain enough cell towers through the deal to increase its network density by 30%.
As part of the merger, AT&T committed to expand its 4G network 1.2 million square miles, making it accessible to an additional 46.5 million Americans, mostly in rural and smaller communities, the statement said.
"This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation's future," AT&T chief executive Randall Stephenson said in a statement.
The AT&T release notes that its 4G expansion would help achieve the Federal Communications Commission and President Obama's goals to connect "every part of America to the digital age."
The $39 billion purchase will include a $25 billion cash payment; the remainder will be paid using AT&T stock. AT&T can increase the cash portion of the payment by up to $4.2 billion while cutting the stock portion.
As part of the acquisition, Deutsche Telekom will have an 8% equity stake in AT&T and a company representative will join the AT&T board of directors.
AT&T didn't directly address how the merger would affect the new company's pricing. But on the website it built to announce the deal, www.mobilizeeverything.com, it notes: "Historically, during periods when carriers combined to achieve efficiencies, U.S. wireless prices fell."
The company also cites a 2010 report from the U.S. General Accounting Office which found that the average cost of wireless services (adjusted for inflation) "declined 50 percent from 1999 to 2009, during a period which saw five major wireless mergers."
By backing down from showing "The Interview,"Sony has set a dangerous precedent. Hackers now have a blueprint for hurting American companies. More
Unilever sued Hampton Creek over its egg-free mayonnaise spread Just Mayo. But the company behind Best Foods and Hellman's mayonnaise has now dropped the lawsuit. More
Payday lenders are spending millions of dollars in Washington in an attempt to get powerful politicians on their side as a government crackdown on the industry heats up. More