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

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.

SHARE:

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

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

133 comments
Log in or register to join the discussion
  • If prices fell....

    Then why is my bill higher than it was back then? Oh that's right - they didn't fall.
    itguy08
    • RE: AT&T makes its T-Mobile case: Patriotism, spectrum crunch, mobile broadband

      @itguy08

      You notice that the mergers involving AT&T don't show any price decline, at least in the near term. Long-term could have all sorts of reasons.
      WebSiteManager
    • RE: AT&T makes its T-Mobile case: Patriotism, spectrum crunch, mobile broadband

      @itguy08
      ditto here!
      If you throw in the rate of inflation, wireless price went up even more despite the declining price for hardware. 101 economics for common people is less competition = higher prices...no pHd required to understand this simple truth.
      Linux Geek
      • Geeze. Once again, the clueless one speaks...

        @Linux Geek
        Please remove your foot from your mouth and your head from your nether regions. The price of hardware hasn't gone down. Few people have the same sort of simple basic phones they had 10 years ago. The phone I got 8 years ago with my T-Mo contract when I signed up didn't even have a color screen. It was strictly a mono LCD model. No web surfing. No apps. Just basic texting. No Bluetooth - just a simple wired mono headset.

        Now a days, you've got iPhones, Android phones, WP7 phones, and so forth. They just don't have all that many simple, basic dumb phones any more. Now, you just can't tell me that any one of the current crop of devices being offered now are cheaper than those craptastic dumb phones from 8 - 10 years ago. Even back then, those phones might have set them back all of maybe $50 when they were new. Even if you factor in inflation, the price of a modern cellular device is still much higher than it would be for any of the dumb phones from 10 years ago. And it's all because the modern cell phone does much, much more than they did a decade ago.
        Wolfie2K3
    • RE: AT&T makes its T-Mobile case: Patriotism, spectrum crunch, mobile broadband

      @itguy08
      Exactly. Announce a 10% cut acroos the board on all plans if he is so confident
      Turd Furgeson
    • Market leader!

      AT&T (or at&t?) is the market leader in PRICE GOUGING. Every move they make increases prices or advances their tyrannical market monopoly. Take U-verse for example.... take it, PLEASE!

      Other than price gouging, AT&T is also slow to roll out new technologies (last place in 4G, nice!!!), sells crippled devices, and won't release software updates.

      AT&T are the LAST FOLKS ON THE PLANET you want monopolizing your wireless.
      jparr
      • RE: Market Leader

        @jparr Then don't use AT&T. That's how free market works-you don't like something, you don't use it.

        Cell Phones have not become a necessity yet, it is still possible to get by without having one for personal use. It may be inconvenient, but if you want to avoid inconvenience then you have to pay for it.

        And if you need a phone for work, make your work pay for it.
        Bucky24
      • RE: AT&T makes its T-Mobile case: Patriotism, spectrum crunch, mobile broadband

        @jparr Any company that wants to help Obumer in any way is a traitor to the people of america. They are trying for a monopoly and our Damocrat Senate will probably let them have for a few million in campaign contributions
        gswank54@...
    • Hmmm.. My bill didn't go down exactly. BUT... (there's always one of them)

      @itguy08
      But then again, my first cellular contract back in about '97 was $40 for 30 minutes per month - That's right 1/2 of an hour from Airtouch (now Verizon)

      Flash forward to 2003. For the same $39.99, I got 1000 minutes - or 16 2/3rds hours per month with T-Mobile. I also get unlimited night/weekend minutes with this plan.

      That seems to be a much better value - a 3300% increase in airtime.

      In the mean time, I'll also bet you've got a smart phone with a data plan - something that didn't exist way back in the day.. Maybe you've even got some texting/MMS or other services thrown in that didn't exist a decade ago.
      Wolfie2K3
      • RE: AT&T makes its T-Mobile case: Patriotism, spectrum crunch, mobile broadband

        @Wolfie2K3
        well said.
        Ram U
      • The question is NOW

        [i]Flash forward to 2003. For the same $39.99, I got 1000 minutes - or 16 2/3rds hours per month with T-Mobile. I also get unlimited night/weekend minutes with this plan.[/i]

        So do you really think AT&T is going to give you the same deal (or a better one) once they have merged?

        That is, [i]if[/i] they merge.
        LTV10
      • RE: AT&T makes its T-Mobile case: Patriotism, spectrum crunch, mobile broadband

        @Wolfie2K3 Which is why I don't have a cell phone. A half hour a month is about what I'd use, but I can't find a $5 a month plan.
        Badge3832
      • re: The question is NOW

        @LTV10
        No.. I expect the new entity to grandfather in my plan. After that, we'll see what sort of deals they have.

        To be honest, I'm not so sure I want to see this merger happen.
        Wolfie2K3
    • prices fell for the PRODUCER

      @itguy08 The cost to the producer fell precipitously over that time period. Consumer prices didn't, meaning the telcos became insanely profitable.

      And a lot of that money is earmarked for buying politicians and their votes, and dangling in front of regulators as a promise for when they walk through the revolving door into a cake job at ATT... IF they "regulate" the "right" way.
      pgit
  • RE: AT&T makes its T-Mobile case: Patriotism, spectrum crunch, mobile broadband

    @itguy08 - I have to agree. My bill has not gone down since I got my cell phone in 1998, but the number of minutes I get per month has. They'll say anything to get approval - they're lying to the government and the public. In my experience, every time corporations merge they claim that their costs will go down and they will be able to reduce prices to customers. Almost every time, they do reduce costs (by laying off a bunch of employees, which results in customer service going down the toilet) but prices go up because there's less competition.
    Unusual1
  • RE: AT&T makes its T-Mobile case: Patriotism, spectrum crunch, mobile broadband

    Who cares about "patriotism" and all the other "good points" when competition is bought out? Take Comcast vs. Qwest as a good example. We are left to choose between these two old dinosaurs and neither one is better than the other, and they won't do a thing to really out-do each other except silly ads, since they are comfortable with the market going to either of them. It's good to have competition because then the consumer wins.

    Say NO.
    jpcmorgan
  • this just needs to fail

    this is a bad idea, at&t is the devil of mobility. the value of t-mobile is the cost effectiveness they provide and features with at&t that goes away. It's crap and needs to fail.
    droidfan27
  • RE: AT&T makes its T-Mobile case: Patriotism, spectrum crunch, mobile broadband

    Look no further than Time Warner Cable in New York City. It is the worst service available, except that it is predominantly the only service available to the city. Only since Verizon has introduced Fios to NYC has TWC done anything to spruce up offerings and services.
    hoaxoner
  • Why stop there?

    Let's extend the "patriotism" and other arguments to their logical end. Let's merge all the wireless carriers into a single one: AT&T. Just think how all those economies of scale will benefit U.S. citizens! Cheap, ubiquitous, and generous data caps! Hooray! Same as we found happened with all the other monopolies....<br><br>Yes, this is ALL sarcasm.
    bmgoodman
    • RE: AT&T makes its T-Mobile case: Patriotism, spectrum crunch, mobile broadband

      @bmgoodman
      Yep! And we can call it Bell Mobile, and let the government prop it up for a few years until someone decides that the monopoly is bad for consumers, and then we can break it up into several Baby Bell Mobiles, and then once the Baby Bells start to fail, we can let them start buying each other and then.....wait, this sounds familiar.
      cartermb