AT&T makes its T-Mobile case: Patriotism, spectrum crunch, mobile broadband

Summary:AT&T executives made their case for the $39 billion acquisition of T-Mobile. The argument for the deal, draped in U.S. patriotism and the future of mobile broadband, was made to regulators, investors and consumers.

AT&T executives on Monday made their case for the $39 billion acquisition of T-Mobile. The argument for the deal, draped in U.S. patriotism and the future of mobile broadband, was made to regulators, investors and consumers.

Company executives---CEO Randall Stephenson, general counsel Wayne Watts and others---said they were confident that regulators at the Department of Justice and Federal Communications Commission would approve the T-Mobile purchase. "When you look at the public interest and customer benefits, this transaction is compelling," said Stephenson.

Stephenson said that the T-Mobile acquisition is about wireless spectrum and avoiding a crunch. Executives noted that T-Mobile didn't have the spectrum to deploy Long-Term Evolution technology. Meanwhile, the joint company will have better coverage.

"We are confident that we can win approval," said Watts. "We've studied the law and the facts and considered every aspect thoroughly."

Full coverage:

How does the argument for the AT&T-T-Mobile deal break down? Here's a look:

Patriotism. It's a bit surprising how hard AT&T played the patriotism card. AT&T has noted it has a union workforce and can be a champion of the President Obama's wireless goals. Stephenson set the tone:

The benefits of this transaction are possible at this scale and on this timeline only from the combination of these two companies. This will improve network quality, it will get more customers access to more services, it will bring advanced LTE capabilities to virtually every community across the United States, and it will create substantial value for our shareowners. But above all else, this transaction represents a major investment and a major commitment by a US company to advance America's leadership in mobile broadband. And that's very important because we're at the very beginning of a major industry shift here to build powerful LTE networks which will prove to be the critical infrastructure in the United States economy. Mobile broadband is already driving unprecedented business productivity. It gives the entrepreneur down the street the exact same tools as the largest corporations. It puts towns and states on a level playing field to compete for investment and jobs. And it's already changing the delivery model for both education and healthcare. And this infrastructure will be a competitive advantage for the United States for many years to come.

A wireless spectrum crunch. Part of AT&T's argument for regulatory approval is disaster avoidance. T-Mobile and AT&T were going to see spectrum problems. Watts said:

The regulatory review is grounded in two legal standards -- first at the FCC the standard is whether the deal is in the public interest and we'll talk about what that means in a second. At the Department of Justice the issue is whether the transaction will adversely affect competition. We are confident we can meet these standards. With respect to the public interest standard, it's no secret that spectrum is in short supply and that's a major concern to policymakers in DC and longer term for others in the industry. For different reasons both AT&T and T-Mobile are facing impending spectrum shortages in major markets. AT&T has been at the leading edge of mobile data growth on our network as a result of supporting more smart phones, more tablets and more eReaders than anyone else in the country. This has created an urgent need -- an ongoing need for significantly more spectrum to support this explosive demand. T-Mobile is also limited in its spectrum capacity, so much so that T-Mobile has no spectrum to build out an LTE network.

The implication from AT&T: Without the merger, T-Mobile is toast.

AT&T and T-Mobile will bring 4G services to more markets. Watts and other executives noted that AT&T would be able to bring LTE to 95 percent of the U.S. "The combination of scale, spectrum and other resources will allow AT&T to extend our 4G LTE network to 95% of the U.S. population. That adds over 46 million more Americans including rural and small communities to achieve the President's wireless broadband goals. That serves the public interest," said Watts.

Prices will fall. One big argument for AT&T was that wireless prices declined 50 percent from 1999 to 2009 even as carriers merged.

Better coverage. John Stankey, president of CEO of AT&T Business Solutions, said that AT&T's capacity will improve 20 percent to 40 percent in its "most densely populated metro areas." Stephenson also said a partnership with T-Mobile owner Deutsche Telekom will also bring down enterprise roaming rates.

The big question: Do you buy AT&T's argument? Analysts seem to think that AT&T will get approval to buy T-Mobile. Piper Jaffray analyst Christopher Larsen said:

AT&T is one of two fairly dominant carriers, and this transaction will reduce 4 nationals to 3. However, there are 5 carriers in most markets. We think the fact that 1) AT&T is a US company acquiring a foreign entity, 2) AT&T is a union shop and will open T-Mo to unionization, and 3) it is accelerating its 4G deployment to underserved areas (consistent with Obama's broadband goal) are all mitigating factors. The large breakup fee ($3 billion plus spectrum) should underscore AT&T management's confidence in winning the necessary approvals.

Topics: Broadband, AT&T, Mobility, Networking, Telcos, Wi-Fi

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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