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Why AT&T's arguments for the T-Mobile deal back it into a corner

Summary: Here's a look at AT&T's arguments for the T-Mobile deal and how they don't look so hot if there's no deal.

Larry Dignan

By for Between the Lines |

AT&T's case for its $39 billion acquisition of T-Mobile revolved around wireless spectrum, and improved network and more coverage for the U.S. But now that the Department of Justice wants to scuttle the deal, those arguments will haunt AT&T if the T-Mobile acquisition ultimately falls apart.

This AT&T-T-Mobile deal isn't over by any stretch. AT&T is likely to request an expedited hearing on the DOJ's request for a preliminary injunction to stop the merger. The DOJ argues that the AT&T acquisition of T-Mobile will lead to two companies (Verizon is the other) owning too much of the wireless market.

Wells Fargo analyst Jennifer Fritzsche noted that regulators appear to favor a U.S. wireless market with four major players. The problem is that regulators would be hard-pressed to stop a T-Mobile-Sprint merger. AT&T will argue that the DOJ overstepped on its antitrust boundaries.

Let's assume that the AT&T-T-Mobile deal is shelved for good. Then what?

Here's a look at AT&T's arguments for the T-Mobile deal and how they don't look so hot if there's no deal.

  • Argument 1: In March, AT&T CEO Randall Stephenson said that the T-Mobile deal is about wireless spectrum. The joint company would have better coverage. It's hard to argue with that spectrum case. However, if there's no deal the next question will revolve around when and how AT&T will get more wireless spectrum. The other conundrum will be cost. How much will AT&T have to pay to procure more spectrum?
  • Argument 2: The combined AT&T and T-Mobile network would have better coverage and "dense network assets." The implication is that AT&T and T-Mobile have network gaps that need to be filled. Without a deal, it's going to be hard for AT&T to contend that its network is up to snuff. After all, AT&T was going to spend $39 billion for T-Mobile to fast track network improvements.
  • Argument 3: More 4G services for the U.S. is a natural outcome of an AT&T-T-Mobile merger. This argument was designed to woo regulators worried about rural wireless broadband coverage. If there's no deal, it's unclear whether AT&T will expand as quickly. Rivals are likely to note that AT&T needed T-Mobile to be a 4G player. The implication will be that AT&T is lacking in the 4G department.

Add it up and these arguments for the T-Mobile deal may back AT&T into the perception corner.

Related:

Topics: Enterprise Software, Banking, Mobility, Networking, AT&T, Wi-Fi

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38 comments
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  • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

    The only people that would benefit from this merger are shareholders; the consumer does not benefit from decreased competition, no matter how hard the companies involved try to spin it. Poor AT&T will just have to build out their network like Verizon is doing rather than trying to buy out their competition - this should actually be cheaper for AT&T than Verizon anyway, considering that the new network is an evolution of GSM, unlike moving to a new platform as Verizon is doing.
    NetAdmin1178
    Reply Vote

    • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

      @NetAdmin1178 I agree 100% sir! The decrease in wireless options are making wireless costs go through the roof. Now they are limiting the amount of bandwidth. Phone bills above the $300 mark for people with families? I guess in a few years with kids watching Netflix, bills will be heading into the $500 range.
      empilder
      Reply Vote

    • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

      @NetAdmin1178 Here's the problem with that argument. We are going to have decreased competition NO MATTER WHAT. T-Mo has said publicly that they will not be spending money to jump to LTE, their parent company Deutche Telecom has said publicly that they want out of the U.S. Market. No amount of wishing is going to change it.

      Given that fact pattern, we have a simple equation: who will give us higher speeds in more places with higher quality? AKA, who has the deeper pockets to spend on their network? AT&T or Sprint? Looking at who was actually willing to stroke a check, I've got to side with the T.
      Morgan_Reed
      Reply Vote

      • I'm undersatnding it like you do.

        @Morgan_Reed I keep seeing all the comments about evil AT&T, but I understood the t-Mobile situation as you laid it out. If they don't get bought, they will exit the US anyway.<br><br>AT&T was the only one who showed any interest publically, so it looks like we lose t-Mobile one way or the other.<br><br>BTW, I am a Verizon customer, so have no love or hate for either AT&T or t-Mobile.
        sbf95070
        Reply Vote

      • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

        @Morgan_Reed

        Wrong! AT&T's deep pockets over and over go straight to profit maximization. Competition is the ONLY incentive for companies to innovate and improve. AT&T is awful for the entire industry. They focus on making themselves attractive to investors instead of customers. If you rely on AT&T, not only do the contents of those deep pockets go straight into the pockets of the board, but AT&T ends up starving the rest of the industry for investment funds. Let DT spin-off T-Mob if, as a global telecom they've decided they no longer wish to be global or a telecom.
        tkejlboom
        Reply Vote

      • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

        @Morgan_Reed
        I understand that TMO in the US is profitable, operating in the black. I saw repeated figures of 1.2b in annual profits. It would be short sighted and a disservice to the shareholdrs if they will just close the doors. DT Pulling out of the US market may happen, but it wil lliekly get sold to someone else, perhaps a new player to the market. Either way, competition is essential.

        What I am surprised not to see in all of the news surrounding this is the monpoly position. Not as the DOJ presents it as 'fewer players' in the market, but more so a monopoly on the type of network. For my part as an IT manager, when the deal goes through I will only have one choice of providers for my international travelers. This is simply unacceptable.
        djmik
        Reply Vote

      • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

        @Morgan_Reed
        Maybe Deutche Telecom could sell it to Carlos Slim Helu and he could add it to his empire. Press 1 for Spanish or 2 for English.
        Au1
        Reply Vote

      • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

        @Morgan_Reed If that's true why haven't they done it already? They just wait around until someone else builds out a network, then buy them out and claim "We've built the best network ever". AT&T doesn't deserve TMobile, period. I don't really care who gets them... Sprint, a group of investors, another company, whatever, as long as it ISN'T AT&T. They'll just run a good wireless provider into the ground and make it crap just like what AT&T offers now. Crap.
        waterhzrd
        Reply Vote

      • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

        @sbf95070 Actually, Sprint was showing interest. AT&T stepped into it and made an offer that Sprint wasn't interested in competing with since they'd also have to spend some bucks integrating TMO's network.
        waterhzrd
        Reply Vote

  • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

    Gee, now AT&T will just have to claw for spectrum.... like the other three carriers. But, they just freed up 39 billion for new tech!
    Hameiri
    Reply Vote

    • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

      @Hameiri well, 36 billion since they had to pay Duetsche Telecom (sp?) 3 billion with the merger not going through.
      ...and I understand AT&T has spectrum they aren't even using... Greedy, greedy AT&T...
      aikeru@...
      Reply Vote

    • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

      @Hameiri 39 billion for new tech!... no its 36 billion, there is a 3 billion penenty for the merger failing in their contract.
      notrozer
      Reply Vote

      • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

        @notrozer I wonder what DumbA$$ @ ATT thought the possibility of tossing $3B in the pot was a great idea?
        ExEC135CrewDog
        Reply Vote

      • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

        @notrozer
        Certainly seems to me that T-Mobile had an inking about the failure of the deal and hedged its bets pretty well.
        hoaxoner
        Reply Vote

    • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

      @Hameiri Actually, I thinks it's onlly $33 billion because they will have to pay T-Mobile $6 billion or so as a breakup fee if the deal doesn't go through.
      ugarzdnet
      Reply Vote

    • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

      @Hameiri,
      You're right. ATT can do a lot of network upgrading for $39B. To think that integrating the two network would speed up network expansion is naive. This is $39B primarily for expanded spectrum.
      randmart
      Reply Vote

  • Verizon Will Benefit, Reducing Competition

    Verizon will be the winner if AT&T does not get T-Mobile for the arguments listed above. Verizon will become larger with more customers, as they continue to leave Sprint and T-Mobile as they are now doing. T-Mobile will not last in the long run as an independent, no matter what "logic" the DOJ uses for its existence.

    AT&T will be delayed in its efforts to compete with Verizon ebcause it will not have the 4G capabilities. It's not just a matter of building more cell towers. They need more space, or spectrum, in the air.

    As to the "competition" argument based on price, T-Mobile, with lower prices, is losing customers to Verizon, one of the higher-priced carriers. In other words people will pay more if they think they are getting better service. So, much for the DOJ argument that T-Mobile is needed to hold down prices.
    brucegil@...
    Reply Vote

    • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

      @brucegil@...

      I think the DOJ would manage just fine pointing to the rate increases just since March. You do have a point about people being willing to pay for better quality, though. If someone could demonstrate better quality and service in my area than T-mob, I'd switch. I'd be able to switch, because there would be multiple national carriers!
      tkejlboom
      Reply Vote

  • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

    Remember Greed is Good! Suffer the little consumers, even though we have the numbers to do something about our cell/wireless bills, we do little or NOTHING to stop the money being made (let's say "taken") by the Monsters of the Cellular World.
    rjh@...
    Reply Vote

  • RE: Why AT&T's arguments for the T-Mobile deal back it into a corner

    Phone bills are already starting to look more like my house payment than I care to see. For a few calls and texts I shouldn't have to spend as much as I now am, much less what it could well go up to.
    bonafide49
    Reply Vote
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