Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
I was sitting at my desk on Sunday, Mar. 20, working on my upcoming Wireless Innovators dinner when I saw the “breaking news” that AT&T Inc. announced it was acquiring T-Mobile USA Inc. “Oh my God,” I thought while I began to read the press release, but as I read the story and began to get press inquiries, I determined that this was a “marriage made in heaven.” Here’s why.
First, there had been rumors that T-Mobile USA might merge with Sprint Nextel Corp. That didn’t make much sense to me since their underlying technologies are so different (T-Mobile USA uses GSM, while Sprint Nextel uses CDMA). I thought at that time it would make more sense for AT&T to acquire T-Mobile USA than Sprint Nextel. Sure enough, that’s what happened. So, from a technology integration standpoint, AT&T Mobility will find it rather straight forward to integrate the two companies.
One really big benefit from the combination is that the 34 million T-Mobile USA customers will almost assuredly be offered Apple Inc.’s iPhone and iPad far sooner than they would have if the acquisition didn’t happen. This would be one of the first things that should happen once the combination receives final approval. It’s possible that Apple and AT&T Mobility could even work out a program to accelerate the approval of the iPhone and iPad for T-Mobile USA customers before full integration is completed.
Another really big benefit of the combination will be AT&T’s ability to grow its international business. Deutsche Telekom AG owned T-Mobile USA and now will own approximately 8% of AT&T. Deutsche Telekom is a major player in the international telecommunications markets – and with a tight partnership with AT&T, they will very likely work together on major international business. Thus, AT&T realizes increased international business.
The acquisition gives AT&T Mobility significant additional spectrum. The deal enables AT&T Mobility to provide more coverage (through T-Mobile USA’s existing cell towers), better service (fewer dropped calls) and higher customer satisfaction. AT&T said in the press conference that their mobile data traffic grew 8,000% over the past four years, and by 2015 it is expected to be eight to ten times what it was in 2010. Combining with T-Mobile USA will give AT&T Mobility more spectrum in which to deal with the expected growth in wireless data traffic.
The merger will accelerate AT&T Mobility’s rollout of 4G. AT&T Mobility is already in the planning stages to roll out true 4G via Long Term Evolution (LTE) technology. With the addition of T-Mobile USA’s base, they will be able to offer LTE to 46 million new households and will, together, be able to offer LTE service to 95% of U.S. households.
Another benefit of the merger will be that T-Mobile USA’s 34 million subscribers will get easy access to AT&T’s Wi-Fi network at 13,000-plus locations – including MacDonald’s, Starbucks, UPS Stores and thousands of other places in which consumers congregate.
Some claim that the combination may result in reduced competition and, therefore, will lead to higher costs. Historically, users have seen reduced costs in terms of dollars per megabyte and, with the introduction of LTE, prices will likely continue to fall in terms of dollars per megabyte (or “dollars per gigabyte” within five years).
I believe that in granting approval of this acquisition, the Federal Communications Commission will require a specific time table and geographical map for AT&T Mobility’s roll out of LTE with steep fines if they don’t meet the stated goals. This would enable, for example, the FCC to ensure that the roll-out plan for LTE will serve all areas equitably. Further, they should require AT&T Mobility to disclose (and the FCC to accept) the “not to exceed” price for LTE services to consumers.
One thing I’d like to see put in the approval process is a requirement that a small part of AT&T’s wireless profits go into a foundation that would be used to fund mobile initiatives for social good. The small tax deductible percent (e.g. 1%) of profits should be matched by Sprint Nextel and Verizon Wireless. A foundation should be set up to manage the distribution of the funds. The contribution should also include a reasonable number of free wireless accounts. This foundation could then approve programs on education and provide phones and services to areas hit by disasters.
Overall, I think the combination of AT&T Mobility and T-Mobile USA is good for the wireless industry and will surely get approved by the FCC and Justice Department (likely with restrictions along the lines I outlined above).
It will take some hard work to complete the merger of these two corporations, but by this time next year, millions of T-Mobile USA customers should be smiling with their new iPhone in their hand. Ask any of them what they think of the combination then, and I suspect they will be very happy that AT&T acquired T-Mobile USA.
J. Gerry Purdy, Ph.D. is Principal Analyst, Mobile & Wireless, MobileTrax L.L.C. As a nationally recognized industry authority, he focuses on monitoring and analyzing emerging trends, technologies and market behavior in the mobile computing and wireless data communications industry in North America. Dr. Purdy is an “edge of network” analyst looking at devices, applications and services as well as wireless connectivity to those devices.
