Cingular Wireless has beaten rival Vodafone in its bid for AT&T Wireless Services with an offer of $15 (£7.88) per share, or about $40.5 billion (£21.3bn).
The deal was signed in New York around 2am after a weekend of bidding and counter-bidding between Cingular and Vodafone. Cingular decided to better Vodafone's offer, valued at around $38 billion (£20bn).
Vodafone - Europe's largest mobile phone company - said it withdrew from the bidding after it "concluded that it was no longer in its shareholder's best interests to continue discussions", adding that it remained committed to its current partnership in Verizon, the dominant operator in the US wireless market.
Vodafone owns a 45 percent share of Verizon Wireless in a partnership that is now four years old. Verizon owns a controlling interest in the mobile phone company.
The purchase of AT&T Wireless by Cingular will reduce the US wireless market from six major players to five. Cingular is currently the second-biggest in the market with 24 million subscribers. The others are Nextel, T-Mobile, Sprint and Verizon.
AT&T Wireless employs approximately 30,000 people in some 500 locations across the US, and as of the end of last year reported about 22 million consolidated subscribers, the company said. AT&T Wireless split from AT&T Corp in July 2001 to become an independent company.
Representatives from Cingular, Vodafone and AT&T Wireless Services could not immediately be reached for comment.
A conference call to officially announce details of the deal has been scheduled for 10 am EST.