AT&T to Buy T-Mobile USA for $39 Billion

Mar 22, 2011 — Allan Pulga

AT&T announced Sunday (March 20) that it had agreed to buy T-Mobile USA from Deutsche Telekom for $39 billion, in a deal that would push AT&T past Verizon Wireless as the biggest U.S. carrier. The merger is expected to take up to a year to close.

“The transaction, one of the largest since the onset of the financial crisis, is expected to start a fierce battle in Washington as regulators scrutinize the effect of the deal on competition and consumers,” wrote Andrew Ross Sorkin, Michael J. de la Merced and Jenna Wortham of the New York Times (March 20).

“Some critics denounced the merger within hours of its announcement, saying it would most likely lead to higher prices. T-Mobile had offered some of the lowest rates in the country, keeping pressure on competitors. While AT&T is expected to honor current contracts, T-Mobile customers may have to pay higher rates once those contracts expire.”

Sorkin, de la Merced and Wortham wrote that AT&T customers would benefit from improved service, since both AT&T and T-Mobile operate GSM networks. AT&T is often maligned for its poor network coverage.

Matt Buchanan of Gizmodo.com wrote (March 21) that the deal “is a bad thing for everybody except for AT&T and Deutsche Telekom,” and listed the following reasons:

  • Less competition all around: Currently, the big four U.S. carriers account for 94 million (Verizon), 86 million (AT&T), 50 million (Sprint) and 34 million (T-Mobile) subscribers. Under the new merger, Sprint will be “half the size of the second-largest carrier, and a little more than a third as big as the almighty AT&T,” wrote Buchanan. “Obviously, that concentrates enormous, near-duopoly powers in the hands of AT&T and Verizon.”
  • Serious spectrum advantages: Areas where AT&T customers used to roam into T-Mobile networks will become “patches” in AT&T’s coverage area and “adds much needed spectrum and towers in places like New York and San Francisco, where AT&T sucks because it simply doesn’t have the capacity.
  • Lobbying and regulatory consequences**: “As Om Malik points out, Sprint and T-Mobile used to stand against Verizon and AT&T on a bunch of regulatory stuff – now Sprint will be alone.”

  • T-Mobile competed on price, customer service and phone choice: Since T-Mobile and Sprint offered cheaper rates than the big two, it brought prices down for everybody. “Remember when T-Mobile and Sprint sparked the unlimited calling war? We’ll we’re currently in the middle of an unlimited data war – also thanks to the smaller carriers,” wrote Buchanan. He also noted that T-Mobile took chances with new devices, introducing both the Sidekick and the first Android phone, the G1.

**Sprint CEO Dan Hesse said, in an interview yesterday (March 22) at CTIA, his company plans to appeal the AT&T/T-Mobile deal to Congress, saying the merger hurts the wireless industry, wrote Greg Bensinger of Bloomberg.

Hesse said the AT&T and Verizon would hold 79 percent of the U.S. market if regulators approve the deal. “I have concerns it would stifle innovation,” he said.

Topics: Wireless Trends, Mobile Industry

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