Well, the $39 billion bid from AT&T to buy T-Mobile is now officially over and AT&T is going to have to lick its wounds and figure out other ways to nab some new spectrum. While the move may cost AT&T a lot of money and some public face, it’s a much larger blow to T-Mobile. What happens now for T-Mobile?
T-Mobile is the fourth-largest carrier, has a nationwide network and offers 4G that can provide comparable speeds to its competition. Sounds good, right? Well, it’s fourth place but it trails Sprint by nearly 20 million subscribers and it’s not even in the same ballpark as AT&T and Verizon when it comes to overall customers and post-paid customers. While its 4G network can provide some fast speeds, it is based on HSPA+42 technology while others are moving to the more efficient and faster 4G LTE technology. As it currently stands, T-Mobile doesn’t have the spectrum capacity to roll out a nationwide 4G LTE network even if it has expressed interest in that in the past.
T-Mobile’s owner, Deutsche Telekom, has been trying to sell the U.S. company for some time now so that it can focus on its more profitable European and it found a willing partner in AT&T. The U.S. government thought the deal would be bad for consumers though, so now T-Mobile is nearly back to square one. While it will get roughly $4 billion in cash and spectrum assets due to a breakup fee, it’s impossible to calculate the lost opportunities for most of 2011.
As for the next move, we’ll likely hear the revival of Sprint wanting to buy T-Mobile but I doubt that will happen. The technological hurdles to combine these two networks in an efficient way are probably too much to overcome and one could argue that Sprint has yet to recover from its Nextel merger, which wasn’t as complicated as a T-Mobile buy would be.
Once it started looking like the deal was torpedoed, we started to hear that AT&T and Deutsche Telekom may partner for a joint venture with T-Mobile’s assets. This would enable AT&T to gain access to some of T-Mobile’s spectrum without as much government scrutiny. This type of deal wouldn’t fully solve AT&T’s spectrum needs but it could be a band aid. This type of arrangement isn’t unheard of, as Verizon Wireless is now the nation’s largest carrier and it’s a joint venture between Verizon and Vodafone.
There are still other companies which could purchase T-Mobile but recent events have probably taken many suitors out of the running. Google buying a mobile company has always been a far-fetched dream to begin with but its purchase of Motorola means any T-Mobile deal would probably not pass governmental scrutiny. The cable companies were also credible threats to push into the mobile market in the past but the recent Verizon spectrum deal removes that possibility for many companies. Essentially, many of the major cable companies sold their wireless spectrum to Verizon in exchange for more protection against the expansion of Verizon’s FiOS service.
The one major exception to that is Dish Network, which has been publicly saying that it would partner with T-Mobile if the AT&T deal fell through. Dish has its own spectrum and has been itching to aggressively dive into the mobile space, so a deal with T-Mobile or eventually, an outright purchase may be the most logical conclusion. I doubt the price tag would be as high the second time around, though.
Another realistic option is for Deutsche Telekom to sell off T-Mobile piecemeal: a few assets could go to AT&T, others to Verizon or Sprint and others to regional carriers like Leap. This approach would likely not be as lucrative as the outright purchase but it would produce some revenues.
To be clear, I actually like T-Mobile and think it offers some amazing devices with well-priced plans. It still has the pieces in place to deliver good service over the next 12-18 months but it clearly needs some sort of major move to really compete with the likes of Sprint, AT&T and T-Mobile.
