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AT&T Buys T-Mobile: What Does it Mean?

by Noah Kravitz | March 21, 2011March 21, 2011 2:21 pm PDT

Yesterday’s news that AT&T is buying T-Mobile USA for $39 Billion was a bombshell. Everyone from bloggers to financial analysts to Sprint employees had assumed that Sprint was on the verge of taking T-Mo U.S. off the hands of parent company Deutsche Telekom, who’d long viewed the US carrier as the black sheep of its Eurocentric portfolio. Now, instead of a nearly level three-way playing field in the U.S. wireless space, we find ourselves a federal approval away from AT&T holding a monopoly on GSM service in the States. ┬áThis could lead to Sprint being left way out in the cold in terms of everything from subscriber base to negotiating and lobbying power with handset makers, spectrum auctioneers and federal policy makers alike.

Even if the deal is ultimately struck down by the Feds, it’ll have a serious impact on the wireless industry. If nothing else, T-Mobile is effectively off the market for the twelve months or so federal regulators will spend deciding whether or not AT&T-Mobile is Kosher. That means Sprint can’t court T-Mo, that means consumers and analysts will be evaluating T-Mo’s potential as though they’re already a part of AT&T, and that means all sorts of things for equipment and software makers looking to do business with carriers in the U.S.

The ink is still drying on the news, and we’re a long way away from knowing what this all will really mean, but here’s my first take on how the AT&T/T-Mobile merger will affect some of the key parties involved:

Consumers Lose

Customers Lose
Competition is good for consumers. The deal would shrink the major U.S. carrier pool from four down to three, and give AT&T a monopoly on GSM service stateside. Decreased competition would also lessen pressure on AT&T and Verizon to keep pace with T-Mobile’s traditionally cheaper and more flexible rate plan options, and also give the carriers even more leverage when negotiating with handset makers.

AT&T Wins

AT&T vaults ahead of Verizon for “First Place” in the carrier wars with this deal, gaining T-Mo’s subscriber base and revenues. They also gain badly needed spectrum and network infrastructure that will help them address the immediate shortcomings in their GSM and HSPA service and accelerate the build-out of their LTE network. That LTE network is what ultimately will compete with Verizon’s already successful – though in limited availability – 4G service, which is proving far superior to AT&T’s own so-called 4G network in early tests.

Sprint Loses

Sprint Store Outside
In the blink of an eye Sprint went from being more or less on par with AT&T and Verizon to falling perhaps too far behind them to ever really compete again. When T-Mobile was Sprint’s to buy, Sprint was suddenly the third of three major players in the US, bigger and better than ever in terms of everything from subscriber base to marketplace leverage, current network capacity to LTE upgrade path, and overall muscle in negotiating with business and government partners. Now they’re left gasping in the dust wondering what, if anything, to do now. Can Sprint continue on as the scrappy “little guy” in the U.S. market? Should they focus on the traditionally profitable, if smaller-scale, prepaid space? Or is a Verizon buyout Sprint’s only real exit strategy at this point?

Verizon Wins

This might sound odd considering the deal would bump Verizon out of the #1 spot they currently hold in the US wireless market, but I think the AT&T/T-Mobile deal would be a win for Verizon. Why? It eliminates the possibility of a far more dangerous Sprint-T-Mobile merger. The deal would boil the U.S. carrier war down to two main competitors and also weaken Sprint, making them ripe for a potential Verizon takeover. The deal would also highlight AT&T’s current failure to roll out a 4G strategy that’s truly competitive with VZW’s early LTE lead, possibly paving the way for an iPhone 5 LTE showdown come this summer. Barring a miraculous bit of network magic over the next few months, said showdown would put Verizon in the advantageous position of being able to exploit their position as the US’ premier network for Apple’s golden goose smartphone. That’s a short-term gain, but it’s still a gain.

Google Loses

Google Sign Outdoors
From the G1 through to the Nexus S, T-Mobile has been Google’s favorite launch partner for “with Google” Android smartphones. Sure, Evo 4G hit Sprint and Droid went to Verizon, but T-Mo USA has proven to be the most aggressive, innovative, and flexible carrier for Google’s muddled but geek-friendly vision of what “pure Android” should look like. AT&T, on the other hand, has been exactly the opposite, the carrier whose committed the most egregious Anti-Google Android sins, like ousting Google with Yahoo! as the default search engine on some of its Droids. Don’t expect AT&T to behave any differently just because they’re inheriting T-Mobile’s Android-friendly heritage. If anything, expect a bigger, badder AT&T to play rougher with Google after the deal goes down.

Apple Wins

Those annoying-to-Apple, annoying-to-Apple-fanboys, annoying-to-Steve Jobs-if-he-ever-watched-commercials, anti-Apple ads with the girl in the magenta dress? A thing of the past.

What do you think the possible ramifications of the AT&T and T-Mobile merger might be?


Noah Kravitz

Noah Kravitz mourned the day that Star Castle was replaced in the pizza parlour he frequented as a kid. The sadness ended when he saw an older kid...

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