NEWS ANALYSIS


mike.hibberd@informa.com


T-Mobile’s LTE rollout, which it needs to get underway in order to keep pace with market leaders. In this it shares a problem with AT&T, and for all the


larger player’s focus on the future of T-Mobile, it is its own future that it really needs to provide for. There are no spectrum auctions imminent in the US and little prospect of re-farming in the near term—and AT&T has had well-publicised capacity issues. The firm needs this deal to work. Ovum’s Jan Dawson says that the most likely outcome is that the DoJ will get its way and the deal will fall through, either through AT&T losing the court case, or pulling out at a point when a loss appears to be the only likely conclusion. If this happens, then new questions arise about the future strategies of both AT&T and T-Mobile.


But critics of the deal are quick to point out that, in any $39bn acquisition, economies of scale are essential to success.


Network sharing is one option. Deutsche Telekom looks to


have made a success of MBNL, the network management JV that it co-owns with Hutchison’s 3 in the UK. But while these kind of arrangements are increasingly prevalent in some parts of the world, Europe in particular, they’re not well established in the US. A wholesale arrangement is another option. After all,


LightSquared is building out an LTE network with a business model based entirely on wholesale capacity, so AT&T could simply lease its capacity from the newcomer. But, says Dawson, LightSquared is, at best, an unknown quantity. “AT&T wants control and stability and LightSquared has been in the news recently for all the wrong reasons,” he says. “Can AT&T really bank on LightSquared to stick around and maintain that wholesale model over ten to twenty years so it can build its 4G play on that network with confidence?” For T-Mobile the hunt will probably begin for a new


acquirer. Domestic opportunities are limited. T-Mobile is one


US MOBILE SUBSCRIPTIONS SEPTEMBER 2010 – SEPTEMBER 2011 Sep 2010


Verizon AT&T Sprint


T-Mobile


AT&T/T-Mobile combined


93,170,000 92,761,000 48,553,700 33,307,300


126,068,300


Dec 2010 94,135,000 95,536,000 49,647,200 32,247,500


127,783,500


of the four US market leaders. With AT&T out of the picture that leaves only Sprint and Verizon. Verizon would simply meet with the same objections from the DoJ that have greeted AT&T’s proposal and Sprint, a company with the industry’s most unwieldy collection of network technologies, would surely baulk at the prospect of adding GSM and WCDMA to the mix. US cable players offer an alternative solution. Their


attempts to break into the mobile space through combined investment in Clearwire have reaped little reward and T-Mobile might prove attractive to them. Or perhaps an overseas buyer. T-Mobile is already


under foreign ownership, so that ought not to be an issue. Telefónica and America Movil are both well established in Latin America and might see the value in a North American presence. Dawson drops NTT DoCoMo and Orange into the mix as well. The last thing that AT&T wants to see is another suitor


getting its hands on all that lovely spectrum, so we can expect to see it fighting hard to win the approval of the Department of Justice. In September, 15 US Members of Congress wrote to Barak Obama asking him to approve the merger based on the prospects it offered for US job creation. “AT&T has announced plans to repatriate 5,000 jobs


that are currently being performed overseas. In addition, a recent SITE study has shown that the merger will create somewhere between 55,000 and 96,000 new jobs to integrate the two networks and upgrade facilities,” the letter read.


But critics of the deal are quick to point out that, in


any $39bn acquisition, economies of scale are essential to success. Whether the merger could sustain such new growth is an issue for debate. AT&T’s problem is that its need to drive synergies would


require the disappearance of T-Mobile as a functioning brand and autonomous market force, which is in direct opposition to the desires of the DoJ. There is no such confrontation as the immovable object and the irresistible force in these situations. But the level of concession AT&T might be forced to offer in order to ease the deal’s path—if the DoJ is prepared to be more flexible than it has let on— could change the face of the deal beyond recognition. n


Mar 2011


104,022,000 97,519,000 50,764,800 33,154,000


130,673,000


Jun 2011


106,300,000 98,615,000 51,848,000 33,104,000


131,719,000


Sep 2011* 109,886,000 100,863,900 52,772,900 33,089,800


133,926,700


Source, Informa’s WCIS Plus www.wcisplus.com *forecast


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