AT&T Letter Damages Case For T-Mobile Acquisition

Aug 12, 2011
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AT&T has been trying to make its case for the $39 billion T-Mobile acquisition since it was first announced back in March. The carrier has been arguing that the T-Mobile purchase is necessary for it to most cost effectively expand its LTE network coverage to meet the demands of today's immense data needs. However, a partially-redacted document the carrier filed with the FCC was accidentally leaked and contained information that specifically derailed this argument.

The leaked letter revealed that AT&T plans to cover 80 percent of the country with its LTE network, and that the addition of another 17 percent to cover 55 million more Americans would carry a price tag of $3.8 billion. And hence, unless the carrier can find a more cost-effective solution, it could only justify LTE deployment to 80 percent of the US population.

“AT&T senior management concluded that, unless AT&T could find a way to expand its LTE footprint on a significantly more cost-effective basis, an LTE deployment to 80 percent of the U.S. population was the most that could be justified,” said AT&T counsel Richard Rosen in the letter.

The company said its merger with T-Mobile would spread the cost of the LTE expansion over a larger revenue base, allowing it to “better absorb the increased capital investment and lower returns associated with deploying LTE to over 97 percent of the U.S. population.”

This seems contradictory because purchasing T-Mobile to add that extra 17 percent would cost 10 times more than if they simply built out their network without the merger. Even if it is to spread out costs with the additional customer base from T-Mobile, it seems unlikely that the T-Mobile acquisition would bring in over 10 times more customers.

However, AT&T has been doing damage control since the leak and argues that it's a spectrum issue. But rival Sprint has shown in the past that AT&T could work things out with its existing spectrum. AT&T has released the following statement:

“There is no real news here,” said AT&T spokeswoman Margaret Boles in a statement provided to Wireless Week. “The confidential information in the latest letter is fully consistent with AT&T’s prior filings. It demonstrates the significance of our commitment to build out 4G LTE mobile broadband to 97% of the population following our merger with T-Mobile. Without this merger, AT&T could not make this expanded commitment. This merger will unleash billions of dollars in badly needed investment, creating many thousands of well-paying jobs that are vitally needed given our weakened economy.”

[via TMoNews]


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