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3/21/2011
12:06 AM
Ed Hansberry
Ed Hansberry
Commentary
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And Now There Are Three: AT&T Acquires T-Mobile

AT&T and T-Mobile have reached an agreement whereby AT&T will pay $39 billion in cash and stock to acquire T-Mobile from Germany's Deutsche Telekom. That will make AT&T the largest cellular network in the U.S., and it is virtually a foregone conclusion that Sprint will be acquired by Verizon.

AT&T and T-Mobile have reached an agreement whereby AT&T will pay $39 billion in cash and stock to acquire T-Mobile from Germany's Deutsche Telekom. That will make AT&T the largest cellular network in the U.S., and it is virtually a foregone conclusion that Sprint will be acquired by Verizon.Just last week I wrote that rumors were hot again that Sprint and T-Mobile were in discussions to merge operations in some way. Well, the rumors were half-right. T-Mobile was involved, but it was having discussions with its GSM sibling AT&T.

Based on the numbers I had, that would give AT&T a 42% share, leaving Verizon with 31% and Sprint with 16%. Regional carriers and resellers make up the difference.

This is far from a done deal though. AT&T and T-Mobile shareholders may agree, but getting the U.S. government and regulators to agree is another matter. The government frowns on acquisitions that create monopolies, even if it is only in some areas. For instance, if there are markets where AT&T and T-Mobile have the lion's share of the airwaves, the Federal Trade Commission may make AT&T sell T-Mobile's coverage in that market to another carrier so AT&T doesn't have a monopoly for that region. If that happens, then market share numbers given above would change. Just becoming the number one network in size with 130 million customers will give the FTC pause.

According to Engadget, the merger is expected to take a year to complete, and that is just signing names on the dotted lines finalizing the transaction. That is when the real work begins as the customer bases are integrated. For those of you with T-Mobile accounts, you'll probably be grandfathered in and not required to switch to AT&T plans -- at least until you try to make a change to your plan.

InformationWeek writer Eric Zeman has more of the technical aspects of the acquisition that discusses the move to a consolidated LTE network.

This leaves Sprint as a distant third in the market -- a very distant third. Verizon will surely protest the AT&T/T-Mobile agreement citing monopolistic issues, free markets, harm to consumers, and whatever else its attorney's can dream up, and they will have a lot of valid points. However, if the deal is approved by the FTC, I would expect Verizon to launch its next stage of growth by going after Sprint. The FTC would have a hard time denying that if they approve this deal. That would leave consumers in the U.S. with basically two choices. That may be good for Verizon and AT&T shareholders, but I don't think it is the best deal for consumers.

We'll have to see how this unfolds in the coming year. Deals like this have fallen apart for a number of reasons. Uncle Sam is high on that list of obstacles to overcome.

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