$39B for T-Mobile, but no iPhone for you
It has been announced that AT&T has purchased T-Mobile for $39 billion and already, headlines across the web enthusiastically claim that T-Mobile users will finally get the iPhone. This is not true.
Two things can happen at this juncture. If the Department of Justice approves the purchase, T-Mobile will get $39 billion but claims it will remain an independent company. The deal is expected to take roughly a year to complete. T-Mobile representatives have said the iPhone will not be offered, rather they “offer cutting edge devices like the Samsung Galaxy S 4G and coming soon our new Sidekick 4G.”
The other scenario would be for the deal to fail for reasons of DOJ rejection or otherwise, in which case, T-Mobile will still receive $3 billion from AT&T.
“In the event the transaction does not receive regulatory approval satisfactory to AT&T and the transaction does not close, AT&T will be required to pay a breakup fee of $3 (billion), transfer to T-Mobile certain AWS spectrum that is not needed by AT&T for its initial LTE roll out, and provide a roaming agreement to T-Mobile on terms favorable to both parties,” AT&T said in their press release.
Confusion in the marketplace
AGbeat has studied our audience’s smartphone preferences and 36% of respondents indicated their next smartphone purchase would be by the end of June of 2011. One of the main reasons cited for not rushing to purchase was confusion in the market about which gadget is best and which carrier is the best. The AT&T/T-Mobile deal is likely to throw another obstacle in the way of those planning to make a purchase.
Will the deal be approved? Sprint weighs in
“The combination of AT&T and T-Mobile USA, if approved by the Department of Justice (DOJ) and Federal Communications Commission (FCC), would alter dramatically the structure of the communications industry,” Sprint said in a statement. “AT&T and Verizon are already by far the largest wireless providers. A combined AT&T and T-Mobile would be almost three times the size of Sprint, the third largest wireless competitor.”
“If approved, the merger would result in a wireless industry dominated overwhelmingly by two vertically-integrated companies that control almost 80% of the US wireless post-paid market, as well as the availability and price of key inputs such as backhaul and access needed by other wireless companies to compete,” Sprint said. “The DOJ and the FCC must decide if this transaction is in the best interest of consumers and the US economy overall, and determine if innovation and robust competition would be impacted adversely and by this dramatic change in the structure of the industry.”
The good news and bad news of how it will work
According to reporter Dean Takahashi, “Asked if AT&T will get bogged down in integration of T-Mobile, De La Vega said he had been through this before with the integration of AT&T Wireless and Cingular Wireless. In that merger, he said that the churn rate among users dropped by half within three years and margins improved. Regarding the iPhone, T-Mobile said only it doesn’t offer it but offers cutting-edge devices of its own. It also said that all contracted plans that are entered into before the ownership will be honored. It also says it will continue to operate its network and handle its own bills.”
Blogger Charlie White was told by Forrester Research analyst Charles Golvin, “AT&T’s acquisition of T-Mobile, if approved, brings good news and bad news. The good news: high-speed mobile broadband service will improve in quality and coverage, including — in the long run — those in rural communities outside the reach of terrestrial broadband today. The bad news: the cost of that service won’t come down nearly as fast as customers would like, since AT&T and Verizon Wireless combined would own nearly three out of every four wireless subscriptions in the US. While clearly troublesome for Sprint and other mobile smaller mobile competitors, It’s also bad news for cable operators, whose incipient mobility products will suffer in comparison to what AT&T and Verizon can offer.”