AT&T buys T-Mobile, woos regulators; Sprint in trouble?

AT&T buys T-Mobile, woos regulators; Sprint in trouble?

Summary: AT&T acquired T-Mobile from Deutsche Telekom in a $39 billion deal that will create the largest wireless carrier in the U.S. Almost immediately, AT&T started its campaign to get the deal approved by regulators.

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AT&T on Sunday acquired T-Mobile from Deutsche Telekom in a $39 billion deal that will create the largest wireless carrier in the U.S. Almost immediately, AT&T started its campaign to get the deal approved by regulators.

The deal will have some serious ripple effects in the industry. Among the key items:

  • AT&T and T-Mobile will have a lot of spectrum for expansion.
  • Coverage for both carriers should improve.
  • That spectrum will give AT&T a lot of headroom for 4G LTE expansion.
  • It's unclear whether regulators will go for this deal---even though AT&T blew Washington a lot of kisses in its statement.

Competitively, Sprint becomes a distant third place player and it's unclear whether the company has much of a way forward. Sprint has to resolve its relationship for Clearwire and plot a 4G LTE plan. Meanwhile, AT&T and Verizon Wireless were already dominating the market and now Sprint lacks the heft to compete. T-Mobile and Sprint have been rumored to merge.

Indeed, Sprint will need a merger partner and Verizon Wireless may be a potential option. That move would create a U.S. wireless duopoly with a bevy of smaller players.

As Jason Hiner noted earlier, the wireless parts make sense. Both AT&T and T-Mobile operate on GSM and that means the networks can come together faster. In addition, AT&T's plan to move to LTE can now become T-Mobile's. AT&T will have about $80 million in total wireless revenue combined with AT&T, up from $58.5 billion today. AT&T also needed more wireless spectrum.

In a statement, AT&T CEO Randall Stephenson positioned the deal this way:

It will improve network quality, and it will bring advanced LTE capabilities to more than 294 million people. Mobile broadband networks drive economic opportunity everywhere, and they enable the expanding high-tech ecosystem that includes device makers, cloud and content providers, app developers, customers, and more...This transaction delivers significant customer, shareowner and public benefits that are available at this level only from the combination of these two companies with complementary network technologies, spectrum positions and operations. We are confident in our ability to execute a seamless integration, and with additional spectrum and network capabilities.

Stephenson also played to President Obama's goals for nationwide mobile broadband.

Those lines are clearly playing to regulators, which will have to approve the deal. AT&T even noted that it had a union workforce---another mention to court regulator approval. The big question is whether consumers benefit from a AT&T-T-Mobile merger. If coverage improves---both networks can be spotty---AT&T may have a case, but there will be a lot of hecklers.

Indeed, Sprint spokesman John Taylor already made it clear where his company stands:

The combination of AT&T and T-Mobile USA, if approved by the Department of Justice (DOJ) and Federal Communications Commission (FCC), would alter dramatically the structure of the communications industry. AT&T and Verizon are already by far the largest wireless providers. A combined AT&T and T-Mobile would be almost three times the size of Sprint, the third largest wireless competitor. If approved, the merger would result in a wireless industry dominated overwhelmingly by two vertically-integrated companies that control almost 80% of the US wireless post-paid market, as well as the availability and price of key inputs such as backhaul and access needed by other wireless companies to compete. The DOJ and the FCC must decide if this transaction is in the best interest of consumers and the US economy overall, and determine if innovation and robust competition would be impacted adversely and by this dramatic change in the structure of the industry.

Among the key nuts and bolts:

  • AT&T will pay $25 billion in cash with the rest in stock.
  • Deutsche Telekom will own about 8 percent of AT&T when the deal is done.
  • AT&T's purchase of T-Mobile is a spectrum play.
  • AT&T estimated that it would take five years to build out its network density to what T-Mobile and AT&T have today.
  • There will be an earnings hit as the T-Mobile deal won't be accretive until the third year after closing.

This acquisition is far from done. There will be a lot of debate over whether a  bulked up AT&T benefits the consumer. AT&T has already started to make its case.

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

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46 comments
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  • I thought all those super-duper Droids on T-mobile were supposed

    to crush AT&T as AT&T had 'sunk' itself by giving strong support to the 'inferior' iPhone (or as the rantings of the Droid fans went for the last three years). "Android super phones will relegate iPhone to 2% marketshare , it's Mac PC again" etc.<br><br>so what the heck happened?<br><br>Fact is - if you read the quarterly financial reports - the last few years with iPhone AT&T was gaining profitable smart phone subscribers while the other carriers were losing them , and all this mainly due to the iPhone.

    CEO of Deutsche Telekom AG (owner of T mobile) Nov 2010 financial report: "Consumers like T-Mobile but they also want to have the iPhone,"

    WSJ "The U.S. used to be a cash cow for Deutsche Telekom but it has struggled there since 2008 and has been forced to invest more to keep existing customers and attract new ones"

    "<br><br>From what droideks were saying last year you would think T mobile would be buying AT&T soon...
    Davewrite
    • RE: AT&T buys T-Mobile, woos regulators; Sprint in trouble?

      @Davewrite
      Yes, because as everyone knows, AT&T only makes money on the iPhone. They lose a stack of cash on landlines, long distance, DSL, U-Verse, Enterprise products and any other cellphone not called the iPhone.
      dazzlingd
      • don't know whether you're being sarcastic but chew on these facts:

        @dazzlingd<br><br>1) Nexus 404. Nov 2010<br>on D.Telekom's financials: <br><br>"T-Mobile US is hurting because they dont have the iPhone. Thats the official word from Rene Obermann, CEO of Deutsche Telekom, T-Mobile USs German parent corporation. Obermann says that the cost of attracting and keeping customers is rising and hurting the customer, and the lack of the iPhone doesnt help.T-Mobile US was once a cash cow for Deutsche Telekom, Obermann told the Wall Street Journal. But since 2008 (a year after the introduction of the iPhone), Tmo has seen increasing costs to both attract and keep customers. Obermann told the WSJ that they now spent $87 per quarter to keep a customer, up from $58 a year ago. They now spend $134 per quarter to attract a single customer, up from $116.<br>And, Obermann made no attempt to hide why T-Mobile US was struggling. Consumers like T-Mobile but they also want to have the iPhone.<br><br>-- get that?<br>The CEO of DT owner of T mobile in (as my first post indicated) said that Tmobile was once a big money earner but not anymore with the iPhone (not on T mobile).<br><br>2) in q3 2010<br>iPhone activations on AT&T was double verizons total smart phone activations. Verizon's sinking profits was one of the reasons it's carrying the iPhone now.<br><br>Asymco dec 2010<br>"By 2009, Verizon was probably optimistic that they could head off AT&T (and Apple) at the pass. With the vast array of vendor Android roadmaps laid out in front of them they saw a way to stem the flood of defections. I think that optimism dissipated sometime this year and was replaced by a more dreadful prospect than what iPhone presented in 2007.<br><br>It is perhaps coincidental that the rumors of a Verizon deal with Apple seem to have started in earnest right after August (davewrite: when aT&T activations exploded and Verizon android sales stalled) . Its thin, circumstantial evidence, but the only evidence we have to corroborate the data above is that Verizon has been signaling more desperation.<br><br>Reading further into the data, I would say Verizon faced these problems and decided that they had to throw in the towel"<br><br>-- sure the other stuff makes money for AT&T but land lines etc also make money for tmobile, verizon etc. as well. If you study the financials it's the iPhone that makes the DIFFERENCE because smart phone contracts are very profitable.<br><br>anyhow the main thing i was laughing at is how REALITY is so different from Droideks FANTASY "AT&T is DOOMED putting so much into the iPhone". Actually the last financials AT&T didn't do as well as people were expecting a shift to verizon iPhone (stats show Android phones don't make many people change carriers no matter how 'good' they are supposed to be).
        Davewrite
    • T-Mobile has no Droids on their network.

      @Davewrite

      Only Verizon has Droids.
      Bruizer
      • RE: AT&T buys T-Mobile, woos regulators; Sprint in trouble?

        @Bruizer

        thats android operating system, ninny ! :)
        limerick007
      • It is genius from Verizon's standpoint.

        @limerick007

        Think about it. Verizon got the TM for "Droid" for phones. Brilliant. Verizon has been able to get people to not talk about "Android" handsets but "Droid" handsets. Their marketing has preempted the name that people use for them.

        When the time comes for these same people to buy a phone, they will Google "Droid phones" and end up with tons of Verizon offerings. No AT&T phones. No Sprint phones. No TMob phones.

        People being people will think only Verizon offers Android phones thinking "Droid" and "Android" are the same exact thing.
        Bruizer
    • deleted

      .
      Hallowed are the Ori
    • As much as you want everything to be related to Apple an dthe iPhone

      @Davewrite
      Verizon didn't have the iPhone, so your saying they're ready to go under too?
      John Zern
      • go read my asymco quote on Verizon

        @John Zern

        and a lot more stuff there at Asymco's website plus other places on Verizon's less than stella financial position due to no iPyhone.

        According to the theory Verizon was forced to take the iPhone because they were losing more smart phone contracts while AT&T was gaining them. Go read the financial reports. It was Apple in control.
        Davewrite
    • RE: AT&T buys T-Mobile, woos regulators; Sprint in trouble?

      @Davewrite T-Mobile was undone by inferior uninteresting "highend" phones and shoddy network performance. If you look at T-Mobile flagship phones, by the time they were released, they were a generation, as far as specs and sometimes OS, behind similar devices from Vz, AT&T and Sprint. If you doubt the effect Android is having on iOS, just look at the fact that Apple used a contract provision to break their exclusivity to get the iPhone on Verizon and the fact that the Verizon iPhone launch was less than stellar (I do understand other factors i.e. new iPhone coming, contract limitations and pending 4G devices). The fact is, DT was trying to unload T-Mobile for sometime now as they didn't want to make the necessary investments needed to really compete with the other three providers.
      It_Is_Boogie
      • Go read my thread and the quotes and references on Verizon

        @It_Is_Boogie <br><br>" If you doubt the effect Android is having on iOS, just look at the fact that Apple used a contract provision to break their exclusivity to get the iPhone on Verizon "<br><br>what the heck are you talking about?<br>If you look at the financials of AT&T and verizon, (some of which I quoted above) it was Verizon which was bleeding : AT&T was gaining valuable smart phone contracts via iPhone while Verizon was losing them. the difference was huge. <br><br>Verizon was begging to get the iPhone. The iPhone is the only phone they're selling without Verizon's brand on it plus according to Apple it's not taking a hit on margins (as many expected) even though it's increasing outlets and not exclusive anymore.<br><br>Apple 'breaking exclusive' contract with AT&T? Although court documents as dug up by Engadget etc show a 5 year time frame, no one knows for sure how the contract was modified or changed over the years. Zdnet: May 2010 on the five year contract "the revelation would normally imply that there are two years left on that contract but, before anyone goes giving up on the iPhone coming to another carrier anytime soon, its important to note that contracts can be altered or dissolved before their expiration dates and that Apple and AT&T likely renegotiated the terms surrounding the iPhone when they hammered out an agreement around the iPad. Bottom line: No one knows how long Apple and AT&T have left in that exclusive contract. So, in essence, nothing has changed."<br><br>thing is did you see AT&t suing apple for 'breaking' contract? the iPhone is by far the most profitable phone for aT&T outselling their androids 15 to one.<br><br>For companies which is you guys don't seem to get: market-share is less important than PROFITABILITY. as mobile found out getting Android market share was expensive and not profitable. Verizon selling droids at discount or giving droids away in bogo deals etc doesn't help the bottom line too much.. <br><br> And as for Verizon's iPhone launch less than stella Verizon CEO says the iPhone is the MOST SUCCESSFUL LAUNCH in Verizon's HISTORY and most sales were online. So if iP4 (an older phone) was their Best in History and you say that's less than stella.. what makes all the androids and other smart phone launches? total suck? lol.<br><br>and I've quote in detail DT's CEO's comment on why T-mobile was losing money which boils down mainly to no iPhone and due to that increasing costs to hold customers (increased advertising, discounts for androids etc.).
        Davewrite
  • very bad for consumers

    This deal is very bad for consumers. I hope the feds
    oppose it.
    rosanlo
    • RE: AT&T buys T-Mobile, woos regulators; Sprint in trouble?

      @rosanlo I hope so too.
      Jimster480
    • RE: AT&T buys T-Mobile, woos regulators; Sprint in trouble?

      @rosanlo

      Me three. Long time T-Mobile user here; I pray to God that the DoJ blocks this.

      Joey
      voyager529
    • RE: AT&T buys T-Mobile, woos regulators; Sprint in trouble?

      @rosanlo <br>Count me another T-Mobile (Voicestream) customer for many years that hates this deal. In my experience its service has been consistently reliable with superior customer service. It hasn't hurt for me that its rate were cheapest as well. Not everyone wants to use an iPhone. Allowing it to drive the market is absurd. It's probably time to carve Apple up into smaller independent companies. I can still remember when all U.S. phone users had to use AT&T equipment, even the public payphones. Remember those? We appear to be rapidly returning to those days. AT&T was obscenely profitable then. Yes, profitability is drives the markets. Profitability is a major cost born by consumers. That's why strong regulatory controls are needed to protect consumers. Corporations should not be allowed to grow so large that competition is squashed.
      grechirp
  • RE: AT&T buys T-Mobile, woos regulators; Sprint in trouble?

    Great! AT&T wireless has consolidated share by merging companies all over the country to create a one large CRAPPY company. Now we have one less competitor, and yet another tentacle to AT&T?s ever growing crappy network and an excuse to raise their prices while not improving their service. http://www.vaishwords.com/2010/11/rethinking-possible-with-at-wireless.html
    vaishwords
  • Apple me this, Batman

    As if there weren't enough unemployment already, that girl in the pink and white dress who makes fun of AT&T in the T-Mobile ads will be needing a new job.
    Robert Hahn
    • RE: AT&T buys T-Mobile, woos regulators; Sprint in trouble?

      @Robert Hahn
      if i were single, i'd put her to work as my 'wingman' LOL!
      limerick007
    • RE: AT&T buys T-Mobile, woos regulators; Sprint in trouble?

      @Robert Hahn
      Or maybe she will be in blue demonstrating talking and surfing at the same time on AT&T's iPhone. LOL
      illegaloperation
    • RE: AT&T buys T-Mobile, woos regulators; Sprint in trouble?

      @Robert Hahn
      Her name is Carly Foulkes. She's a Canadian model/actress that has been mistaken for Mad men actress, Jessica Pare (another Canadian). I'm sure the T-Mobile gig pays well and has been great exposure for her, but she should do well employed elsewhere should this AT&T/T-Mobile sale be allowed to happen.
      grechirp