AT&T Seeks Approval for $39 Billion T-Mobile Bid

Published May 11, 2011

AT&T says its proposed $39 billion acquisition of T-Mobile will bring LTE (long-term evolution) coverage to 97 percent of the United States—representing an additional 55 million customers—and make it the largest wireless network in the United States. The deal, however, faces months of scrutiny from Congress, the Justice Department, and the Federal Communications Commission even if is eventually approved.

AT&T argues the T-Mobile merger will provide better service, fewer dropped calls, and more efficient use of available wireless spectrum.

Richard Shaer, vice president of strategy for Paltalk, a New York-based voice and video chat application, agrees, saying the merged company would provide more spectrum and bandwidth to a greater number of people, which would help spur innovation.

‘Reshape the Wireless Industry’
Since the merger plans were announced in late March, wireless competitor Sprint and the activist group Public Knowledge have been outspoken opponents. “AT&T in this one transaction will fundamentally reshape the wireless industry in ways that will hurt consumers, raising prices, restricting innovation, and limiting choice,” claimed Public Knowledge President Gigi Sohn in a prepared statement.
Mark Faust, a growth coach employed by Echelon Management International, a Cincinnati, Ohio-based turnaround consultancy firm and author of Growth or Bust! Proven Turnaround Strategies to Grow Your Business, dismisses Sohn’s and Sprint’s claims.

“Anyone who is against or afraid of the merger is lacking basic innovation and positioning abilities and would probably be put out of business as a result of their ineptness more than because of any potential merger,” Faust said. “Competitors that fear the supposed competitive advantages of the merger have more internal problems and shortcomings to be concerned about than any merger could ever bring them.”

Faust added: “The strong competitors are already positioning this move as a sign of weakness on their competitors’ part. The marketing and sales messages are already hitting existing and potential customers with positive results. I have worked with some of the players in this industry, and to be concerned about ‘unfair advantage’ is a sign of another more concerning weakness.”

T-Mobile Survival Doubted
Steve Titch, a Reason Foundation telecom policy analyst, points out any concerns over the elimination of a national wireless carrier miss the point that without a business partner like AT&T, T-Mobile is unlikely to be around anyway in the next few years. Titch points out Deutsche Telecom, T-Mobile’s parent company, is on record saying that it doesn’t plan to continue investing in T-Mobile.

“T-Mobile is scrambling,” Titch said. “What happens if the merger is turned down? T-Mobile doesn’t have the cash flow to stay competitive with the other carriers.”

A combination with AT&T, on the other hand, helps both companies. AT&T has additional cash, and T-Mobile has service in many areas where AT&T doesn’t. T-Mobile is also ahead of AT&T in terms of 4G development, said Titch.

Sprint will still offer significant competition, as will regional carriers such as U.S. Cellular and PCS Metro, Titch added. “Sprint isn’t as well as many make it sound, although it does possess a very strong business and emergency services market.”

‘A Quick and Helpful Fix’
The merger, if approved, will accelerate technology development, says Bruce Mehlman, co-chair of the Internet Innovation Alliance in Washington, DC.

“The proposed merger represents one of the most promising developments in the ongoing effort to realize 100 percent broadband deployment and adoption in our country,” said Mehlman. “Besides the stated commitment to offer 4G services to 95 percent of the country, such marketplace combinations will be essential to ensuring the aggregation of spectrum and capacity needed to accommodate the exponential explosion of digital data enabled by innovations in video, wireless, cloud computing, and social media,” he said.

“The exponential explosion of digital data enables terrific innovations but strains existing broadband networks,” said Mehlman. “This proposed combination of entrepreneurial players would seem to offer a quick and helpful fix for the spectrum crunch that jeopardizes our global leadership,” he said.

Mehlman added: “Consumers and policymakers alike should understand that this merger fits into a dynamic telecom marketplace that has long been highly innovative, rapidly evolving, and incredibly beneficial to consumers and our economy. U.S. wireless prices consistently fell throughout the past decade as wireless carriers combined and realized efficiencies and critical mass of spectrum.”

Apps and Billing Benefits
“The AT&T/T Mobile merger will not have a near-term impact on the mobile app industry, but it will certainly further the acceleration in the quality of the apps, due to the accessibility to higher network speeds,” said Clint Parr, CEO of MacroSolve, a Tulsa, Oklahoma-based developer and marketer of mobile technologies, applications, and solutions. “Also, app developers will be able to reach a much larger audience with the combination of these two networks.”

A significant element of the merger will be the challenges surrounding billing, says Bzur Haun, president and CEO of Visage Mobile in San Francisco, California. “As we have seen in the past with AT&T’s acquisition of Cingular and Verizon’s acquisition of Alltel, the process is cumbersome, and it can take several months, if not years, for the billing systems to become fully integrated. It will be interesting to see the outcome of combining two carriers with markedly different pricing strategies,” he said.

“The acquisition of T-Mobile by AT&T is very logical, based on both network and international considerations,” added Haun. “It is obvious that all major carriers are focusing on enterprise mobility and servicing global businesses. For the enterprise, this deal brings together the two carriers that manage a majority of international mobile consumption for U.S. multinationals.”

Phil Britt ([email protected]) writes from South Holland, Illinois.