The AT&T and T-Mobile USA merger is off, but how will this affect LTE in the US?
So it’s all over at last. After months of attempted deal making AT&T has thrown in the towel in its $39 billion attempt to take T-Mobile USA off the hands of its parent company Deutsche Telekom. The defeat followed on from both the Justice Department and the FCC blocking the deal, stating that it would be bad move for consumers by reducing competition in the market, raising prices, and doing harm to the economy due to inevitable job losses.
“Consumers won today,” said Sharis Pozen, head of the Justice Department’s antitrust division, according to the Wall Street Journal. “Had AT&T acquired T-Mobile, consumers…would have faced higher prices and reduced innovation.”
While it might be good for consumers, it’s a blow for all the players in the deal. As recompense to T-Mobile, AT&T has to cough up $3 billion in cash, and ironically, actually divest some spectrum to it as well. AT&T was keen on the deal as it was a relatively affordable way for it to get hold of T-Mobile’s spectrum so it could more easily compete with Verizon. The latter company has managed to raise its profile with a successful LTE network roll-out, just as AT&T has lost the shine which came from its iPhone exclusivity deal – a now distant (and for some bad) memory. At the same time, it would have eliminated a competitor for AT&T; albeit a struggling one.
AT&T will also now have to take the more traditional route to improve its network, by investing in its own infrastructure, and bid for any spectrum that might become available on the open market. This will undoubtedly come at a higher price than if it had been able to acquire T-Mobile’s AWS spectrum directly.
Deutsche Telekom has failed to offload an ailing and costly part of its business, it will now have to decide whether it tries to flog off T-Mobile to someone else, or go the other way and choose to invest heavily. The latter seems unlikely.
T-Mobile though now faces the prospect of having to try and compete to stay alive after months of not investing in its network. It’s doesn’t offer the Apple iPhone, whereas the top three now do, making it even harder to win lucrative customers that sign contracts. It lost 850,000 such customers in the first nine months this year, and this news is unlikely to stop the leak.
It’s not all bad though for T-Mobile. One upside for is that as part of the deal severance, it now has a seven-year (domestic only) roaming agreement with AT-T, which will increase its footprint across the country into areas where it previously has no coverage.
Meanwhile it’s a big, big win for Verizon, which while it’s competitors were locked up in a fruitless battle with the courts and the regulator, announced its intention to buy AWS licences from failed joint-venture cable companies SpectrumCo and Cox Communications, giving it 40-80MHz of spectrum to play with many urban areas. As this is a relatively non-threatening move compared to what AT&T was trying to pull off, it’s likely to sail through the FCC and Justice Department unopposed. (Update: OK, maybe not. The DOJ is now taking a close look at this one too).
When you throw in the uncertainly around LightSquared’s attempts at launching a LTE network, and Sprint and Clearwire’s move away from WiMAX to LTE, this year has been a year of sound and fury, while signifying relatively little.
If the US carriers can decide on clear strategies and choose to move forward instead of playing political games, LightSquared could sort out its GPS related technical issues and become a major disruptive influence in the market, making next year a truly seismic one as far as LTE in the US is concerned.