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AT&T’s acquisition of T-Mobile USA for $39-billion is an enormous move that will change the landscape of the American mobile market. Longterm, it means less choice for consumers and less competition in an already tight market. That said, there are several facets to this deal that make is so fascinating. Let’s take a look.
I Love This Deal For AT&T
This is a brilliant move for AT&T on so many levels. Immediately it can claim to be America’s number-one network over Verizon by a large margin. Combining AT&T and T-Mobile USA subscribers adds up to roughly 130-million, while Verizon has around 100-million. Sprint would be left looking like a chump with 50-million subscribers.
In the near future — probably a year or so — both AT&T and T-Mobile customers can expect improved service. AT&T has been getting knocked for not spending its money on building towers to improve reception. It’s not nearly as easy as paying for a tower and building it. Local governments have to approve the placement of new towers (which takes longer than it ought to) and a lot of people don’t want them in their neighborhood. Buying T-Mobile USA was the quickest and easiest way to acquire several new towers.
Longer term, the acquisition jump-starts AT&T’s 4G initiatives. AT&T has committed to LTE, while T-Mobile USA planned to squeeze HSPA+ as long as it could before moving to LTE. AT&T’s 4G strategy prior to the acquisition seemed sluggish, especially compared to Verizon’s aggressive LTE deployment and Sprint’s dalliance with WiMax (all signs point to Sprint converting to LTE as well). In addition to buying a bunch of towers, AT&T also acquired a bunch of T-Mobile spectrum that will help the company accelerate its 4G plans. The initial idea is to use T-Mobile’s AWS spectrum as AT&T’s LTE channel.
I Love This Deal for T-Mobile…Should it Fall Through
A deal this size faces enormous scrutiny from the Justice Department and the FCC. Yesterday, I spoke with eight friends in the tech industry — analysts and journalists — and they were split on whether the deal happens or not. (Yes, I spent a large chunk of my Sunday talking nerd news with friends.) The good news for T-Mobile USA is that it will walk away with $3-billion and a chunk of AT&T spectrum, should the deal fall through. That’s a healthy “breakup clause” that would leave T-Mobile in a better position to compete.
I Hate This Deal as a T-Mobile Customer
Although nothing (much) will change for a few years, I completely expect T-Mobile’s value and customer service to decline as time goes on. T-Mobile’s plans are generous compared to AT&T’s and I expect the gap to close. Even if T-Mo is kept around as a value brand, I see things like unlimited data, free phone unlocking (for use with international SIM cards), free tethering, and top-notch customer-service being phased out.
The features I’ll miss the most are UMA and WiFi calling. In order to compensate for its small network footprint, T-Mobile allows its users to buy phones that use WiFi signal for calls and text messaging. This is also convenient for indoor locations that get poor signal (big buildings, basements, etc.) and customers that live in the boonies. As an international traveler, I love being able to use UMA and WiFi calling; it’s a “free” way to make and receive calls while in other countries (though I understand that was never the primary purpose of these features). The combined footprint of AT&T and T-Mobile makes supporting UMA and WiFi calling unnecessary. I fully expect these features to go away. When that happens, I’ll hug my phone and say, “I’ll miss you the most, Scarecrow.”
What to Do?!?
A lot of T-Mobile customers are panicking, erroneously thinking that their service will suck and their bills will double starting today. Get a grip people. It’ll be at least a year (and likely more) before any significant changes. As a T-Mobile customer, I’m ready to sign another two-year agreement with the company or perhaps buy my next phone outright and move to an Even More Plus plan. AT&T has already claimed that it will honor existing contracts. If it alters them in any way, that gives me an easy out to switch to Verizon.
AT&T customers have a bright future to look forward to. Existing services will improve some time next year and 4G services will arrive faster than originally scheduled. Of course that’s all dependent on government approval.
As always, I want to hear your thoughts on AT&T’s acquisition of T-Mobile USA from Deutsche Telecom. Fire away (please)!