AT&T Announces Deal to Buy T-Mobile; Opposition Likely to Arise

The wireless carrier market is being turned on its ear today – pun intended – as AT&T has announced a $39 billion deal with T-Mobile’s parent company, Deutsche Telekom (News - Alert), to acquire the number 4 carrier. The news was enough to cause John Timmer of this ars technica report to ask whether the recent T-Mobile advertising campaign attacking AT&T (News - Alert) was a precursor to the deal or if the deal was a way to quiet the squeaky wheel.

Conventional wisdom would suggest that AT&T could have easily risen above the multimedia campaign, and instead is seeking to create the largest cellular carrier in the U.S. and the only one to offer GSM phones. If this deal comes to fruition – and some suggest the regulatory risks are too great – AT&T would own 40 percent of the lucrative mobile market.

The deal does make sense for Deutsche Telekom as it would eliminate the need to maintain a large network and retail infrastructure to support a smaller carrier base. The company will also be able to avoid the cost of upgrading its current infrastructure to the LTE (News - Alert) 4G platform that will soon become the standard. And, of all the key players in the U.S. mobile market, T-Mobile is the only one without a clear 4G plan in place.

This is not to suggest that T-Mobile (News - Alert) can’t deliver the 4G speeds it has been advertising. The carrier has been relying on HSPA+, which is an improved form of current technology that is able to deliver maximum speeds of 84 Megabits/second. This speed is a tad slower than LTE’s 100Mbps, but still significantly faster than plain HSPA. The enhanced speed is enough to give the carrier a faster network than AT&T’s as the giant has yet to launch its own LTE network.

For its part, AT&T has made the upgrade to HSPA+, but only in some areas of the network. The carrier has yet to advertise that it is offering 4G, which industry experts assume is part of the carrier’s effort to avoid confusion when it actually starts releasing its LTE devices. With the success of this deal, AT&T would have access to more HSPA+ infrastructure, and could help the carrier to roll out faster speeds more quickly.

Faster speeds or not, the fate of this deal could be left to the current administration to decide, according to this Examiner report. The press release announcing the deal noted that the board of directors of both companies have approved the deal and AT&T promises that the transaction will ensure the significant expansion of robust 4G LTE deployment to 95 percent of the U.S. population, including rural communities and small towns.

It can easily be assumed that AT&T is leveraging its words carefully to make this deal look as though it is good for the people. The giant has also pointed out in the release why this deal will not hurt competition, stressing instead that it would have taken the company five years to build new cell towers to provide the coverage it can gain with this acquisition. These claims are likely to leave some asking whether the deal is good for the people or just AT&T.

The news did have one CNet blogger asking if AT&T will kill the T-Mobile ads, but maybe AT&T has something more impressing up its sleeve. And, considering opposition to the deal is likely to emerge in full force, the existence of the ads is likely to be the last thing on anyone’s mind.

Meanwhile, on his Communications & Technology blog, TMC CEO Rich Tehrani (News - Alert) wrote “From AT&T’s standpoint the timing couldn’t be better as the company has had years to weaken T-Mobile as a competitor while maximizing its own share price in the process. To maintain momentum, it purchases a carrier with the same network technology – GSM meaning minimal disruption in terms of jerry-rigging disparate wireless technologies.” To read his initial analysis on the proposed deal, click here.