News broke this weekend about a potential merger between T-Mobile and AT&T, who would acquire the company from Deutsche Telekom for $39 billion in cash and stock. This is just the first step in a process that may take as long as a year pending regulatory approval. As Sprint puts it, if the deal goes through, the market will be “dramatically altered.”
Obviously, this is a definite win for AT&T. Acquiring T-Mobile will add density to their existing network and possibly change the perception that they are unreliable. T-Mobile has been one of the most vocal companies speaking out against AT&T’s network with their latest ad campaign, depicting AT&T as an aging and out of shape business riding on the back of the iPhone. AT&T would also jump so far ahead of Sprint, the third largest carrier in the US, that Sprint would probably never catch up.
And what of T-Mobile? While they have never had the largest network, they have remained a force of change in the market. They’ve experimented with new technologies and handsets while helping keep prices in check by offering cheap plans. All that goes out the window once AT&T consumes them. There aren’t even plans for a T-Mobile iPhone.
While AT&T is attempting to spin this as a win for the consumer, we lose for many of the same reasons T-Mobile does. In fact, you can also through in the handset makers and wireless equipment companies. We will all be forced to deal with one entity. This means that handset makers and wireless equipment companies have lost a customer and AT&T will leverage this for their own benefit. Less competition is almost never good.
One of the more interesting angles on this story is what will happen to Google’s Android. While many are saying it could go either way, I think it will most likely go south. Verizon has already launched their own Android App store and AT&T will most likely do the same. With less competition, it will be easier for them to shove whatever they like down the consumer’s throats.
When it comes down to it, there is one way I think T-Mobile can come out of this a winner. If the deal is not approved or doesn’t go through for any reason, AT&T will still have to pay a “breakup fee.” This is similar to the early termination fee for breaking your wireless agreement. T-Mobile will get $3 billion, access to some of AT&T’s AWS spectrum, and a roaming agreement.
via GigaOm, Business Insider, Engadget