AT&T Acquires T-Mobile

What a big day for the telecommunications industry.  AT&T has just announced that they have bought T-Mobile USA for $39 billion worth of stock and cash.  T-Mobile USA, previously owned by Deutsche Telekom, seemingly stood at the forefront of the next wave of wireless communication with their 4G capability, but somehow couldn’t compete.  AT&T, although a trailblazing provider of the Apple iPhone, has struggled to maintain dominance since the introduction of the iPhone4 for Verizon.

Even beyond that, AT&T hasn’t been able to manage its’ own growth.  The company has had a hard time with delivering a network that is convenient to users.  The limitations of AT&T are what prompted this purchase.  By acquiring T-Mobile USA, AT&T stands to surpass Verizon as the nation’s largest wireless communications service provider.  AT&T is making it clear that they intend to be the most vital player in the telecom game.

Deutsche Telekom is undoubtedly relieved to shed T-Mobile USA for about $11billion less than what they initially paid for it in 2000.  Deutsche Telekom hoped that T-Mobile, then VoiceStream, would have become a force to be reckoned with in the US communications arena.  T-Mobile has yet to become profitable enough to justify that purchase.  In effect, this recent sale works out for both parties invovled.  AT&T becomes more relevant and capable of producing quality service while Deutsche Telekom removes a burdensome parasite that has been hindering its’ potential for growth.

There is a slight hitch however that could burst AT&Ts’ bubble.  AT&T needs regulatory approval before it can become the wireless giant it desires to be.  AT&T wants to be able to provide its customers with broadband service that is high-speed regardless of geographical area.  Unfortunately, AT&T has a reputation of dropping calls in certain metropolitan and rural areas.  Rather than develop the infrastructure needed to compete with Verizon, AT&T simply bought a company that would instantly improve their coverage ability and high-speed capabilities.  To get the coverage that AT&T needs to keep up with growing data demand, it would take several years and a lot of red tape to build the towers that are needed to develop their infrastructure.

To get approval, the AT&T and T-Mobile USA merger must not represent a monopoly in the wireless industry.  Right now there is speculation that this sale will mean that 75 percent of wireless phone users will be using a phone that falls under the AT&T umbrella.  This leaves other wireless service providers in a rough position because they are already low on the totem pole when it comes to popularity.

I am all in favor of mergers that make sense but not ones that leave consumers with limited choices.  Whenever big business completely controls the marketplace there is bound to be a problem down the road.  I appreciate that AT&T and T-Mobile have united to build a stronger service but this shouldn’t make it harder for consumers to utilize their options.  It will be interesting to watch this deal unfold and materialize.

March 21, 2011