Both AT&T and Deutsche Telekom seem confident that this deal will get past the US regulators, but the sheer size of the combined company inevitably raises competition issues. AT&T is currently the largest mobile operator in the US by number of…
Both AT&T and Deutsche Telekom seem confident that this deal will get past the US regulators, but the sheer size of the combined company inevitably raises competition issues.
AT&T is currently the largest mobile operator in the US by number of subscribers (95.5 million), while T-Mobile USA is the fourth largest (33.7 million).
The new company would dwarf its main competitors, with a combined subscriber base of over 129 million. Verizon Wireless says it has 93.2 million wireless customers (although it also claims to have 7.9 million “other connections”), while the no.3 operator, Sprint Nextel has 49.9 million subscribers.
AT&T is tackling the competition issue head on.
It said in its statement: “The US wireless industry is one of the most fiercely competitive markets in the world and it will remain so after this deal.”
It suggested that the acquisition would be a good deal for American consumers.
It pointed to the fact that a large majority of American consumers can choose between five providers. It also said that despite five major wireless mergers in the period 1999-2009, the average price for wireless services had dropped by 50% (factoring in inflation).
It also announced a series of sweeteners that may be used to convince regulators.
AT&T’s infrastructure investment in the US will increase by US$8bn as a result of the deal.
It will expand 4G LTE coverage to 95% of the US population, including large numbers of people in rural or underserved areas.
Although AT&T’s network coverage is significantly wider than that of T-Mobile USA, the two networks still cover broadly the same areas of high population density in the US, according to coverage maps on the websites of the two operators.
The towerco Crown Castle released a statement yesterday claiming that both carriers currently reside on 4,000 of its towers. There may be potential for synergies here, although Crown Castle also said that an average of 12 years and 7 years were still remaining on its lease agreements with AT&T and T-Mobile USA respectively.
The FCC had no comment on the deal, but it has been emphasising its desire to expand broadband coverage to the 24 million Americans who cannot currently access internet.
Yet AT&T’s competitors are already putting pressure on the regulatory authorities over this deal.
Sprint Nextel said in a statement that the deal would “alter dramatically the structure of the communications industry”.
It also said: “The DOJ [Department of Justice] and the FCC must decide if this transaction is in the best interest of consumers and the US economy overall, and determine if innovation and robust competition would be impacted adversely and by this dramatic change in the structure of the industry.”
The decision facing the regulators will therefore be balanced delicately between two of their guiding principles: ensuring a competitive market and expanding telecoms services throughout the US.
