AT&T Makes Smart Call in Acquiring T-Mobile
AT&T's big move over the weekend to acquire T-Mobile and become the country's largest wireless provider could offer clear benefits to current AT&T subscribers, an analyst said.
AT&T announced on Sunday (March 20) that it is acquiring T-Mobile USA from Germany-based Deutsche Telekom AG for $39 billion in cash and stock. AT&T, currently the second-largest wireless company, hopes to attract some of T-Mobile's 34 million customers to its network, but those users could well be in play for other carriers.
"Deutsche Telekom has been trying to figure out what to do with T-Mobile USA for quite awhile since it hasn't fit into the U.S. market so well," said Mark Beccue, a senior analyst at ABI Research. "Since the deal will give the AT&T network even more resources and capabilities to grow its cell and 3G networks, as well as building its sophisticated 4G network , it’s a great move for AT&T."
AT&T's acquisition will allow the company to gain control over T-Mobile cellular towers . This means that customers would have faster service with fewer dropped calls and more data reliability, so users, for example, could stream video via a smartphone with fewer interruptions.
The likelihood of better coverage not only gives existing AT&T customers more incentive to stay put, but it could also attract new subscribers.
Although the benefits for AT&T's current subscribers are clear, T-Mobile users will be faced with a decision as to which carrier they should select. T-Mobile has positioned itself as the go-to network for those seeking value and the cheapest price, but AT&T's focus is different.
"AT&T's philosophy is providing a higher quality of data offerings and a better level of service even if it comes with a higher price tag," Beccue said. "AT&T won't likely change this because having a stronger, more reliable network is worth diamonds to them."
"This might raise some issues for T-Mobile subscribers looking to keep monthly bills down."
After the announcement hit the Web, there was much speculation as to where T-Mobile users will likely go if AT&T doesn’t meet their needs.
Beccue believes that T-Mobile users may start looking into Sprint's network, which offers a pre-paid service in addition to its regular service.
Many had believed that Sprint was the obvious choice to acquire T-Mobile as a part of Sprint's effort to beef up its network.
"AT&T and Verizon are quite large, so combining Sprint and T-Mobile would have given them the opportunity to be similar in size and a big competitor," Beccue said. "Everyone thought that's what was going to happen. AT&T and T-Mobile certainly kept this news quiet as they negotiated a deal."
AT&T will likely start to make T-Mobile users offers to join its network in the near future, Beccue said.
Although the acquisition is set, customers won't experience any changes for several months. The deal first has to be approved by the Federal Communications Commission, which might balk at the combining of the second- and fourth-largest wireless providers since the merger would present customers with fewer options in the wireless market.
The Verizon reaction
Now that AT&T has positioned itself to lead the pack of mobile carriers, some believe that Verizon might be interested in buying Sprint to further boost its own network.
"It's definitely possible that Verizon could buy Sprint." Beccue said. "Although this has been discussed in the industry for awhile, there really hasn’t been a driver for Verizon to do something like this."
Acquiring Sprint would allow them to gain a spectrum of capabilities similar to what AT&T just did with T-Mobile, but Beccue believes Verizon doesn't need to do anything at this point.
"Verizon doesn’t need to react right now, but Sprint does since they are the smaller company that needs to figure out a way to stay afloat," Beccue added.