AT&T and T-Mobile Acquisition Makes Sense

Mar 20, 2011
AT&T and T-Mobile Acquisition Makes Sense

We had to anticipate some consolidation of our networks in the US at some point in time. It turns out the beginning of that movement has begun as AT&T has agreed to buy T-Mobile for $39 billion dollars from Deutsche Telekom. So what does this mean? Is this bad or good for the telecommunications industry and for consumers as a whole?

What does T-Mobile give AT&T
First of all AT&T will become the largest telecommunications provider in the United States giving them a total customer base of 130 million people. Second it will give AT&T a stronger position with GSM going forward. AT&T has been clear about their 4G path to LTE where T-Mobile hasn't. There are a number of network migration paths, however the less fragmentation in 4G networks the better for handset manufacturers and network infrastructure providers in general.

When you look at some of the other countries where there is less network technology fragmentation we have tended to see more advancements in their infrastructure. Hopefully with AT&T having a near monopoly of the GSM network in the US we will see more advancements as they seek to standardize future network technologies. We would also hope that this level of standardization would encourage and promote more handset innovation as well.

The Cons of Consolidation
Of course the negative of consolidation is the lack of competition. With AT&T acquiring T-Mobile, they no longer have any real competition in the GSM market. There are network benefits that GSM brings to many consumers who prefer it to CDMA. T-Mobile was in a position to keep the pressure on AT&T with pricing, GSM network technology as well as with the devices themselves.

So would we be surprised if somewhere in the next few years Verizon made a bid for Sprint? Probably not, although it would be mostly for the customer base rather than the network technology. As I said at the beginning, network operator consolidation was expected. Now we will wait to see how it unfolds and how AT&T uses this acquisition to better their networks and keep their prices - as well as the devices that run on their network - competitive.

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