AT&T reached a deal with Deutsche Telekom on Sunday to acquire T-Mobile for about $39 billion. Deutsche Telekom would gain a seat on AT&T’s board of directors and acquire about 8 percent of the company, according to AT&T’s news release.
If the merger, which has already been approved by the boards of both companies, garners the necessary regulatory approval, it will be the largest carrier in the nation, with 25 percent more subscribers — 125 million — than Verizon’s 93 million.
“If the feds let this deal go through, that’s a big question,” said Chris Herbert, a Santa Barbara app developer who founded Phone Halo, an app that locates where an item was lost through GPS technology. “Taking out competitors in a small field is pretty risky thing to do in terms of monopolies.”
AT&T cited two main motivations behind the deal: the acquisition of infrastructure to boost network reliability, and to gain more spectrum for mobile broadband use, which it says would improve service quality.
“AT&T’s mobile data traffic grew 8,000 percent over the past four years, and by 2015 it is expected to be eight to 10 times what it was in 2010,” AT&T said. “Put another way, all of the mobile traffic volume AT&T carried during 2010 is estimated to be carried in just the first six to seven weeks of 2015.”
Andy Seybold, a globally recognized mobile computing consultant and founder of Andrew Seybold Inc., said the merger would benefit customers by increasing infrastructure and spectrum, translating to better coverage and reliability.
“Assuming it will take a year to 18 months to get through the federal regulators, once they do and combine networks, they add cell sites and spectrum, coverage improves and it’s a win-win for everybody except for Verizon,” he said.
AT&T said adding more cell sites is one of the only efficient ways to solve its network limitations and high demand.
“At closing, AT&T will immediately gain cell sites equivalent to what would have taken on average five years to build without the transaction, and double that in some markets,” AT&T said. “The combination will increase AT&T’s network density by approximately 30 percent in some of its most populated areas, while avoiding the need to construct additional cell towers.”
Jason Spievak, CEO of RingRevenue, a Santa Barbara service that allows networks to attract calls like they do clicks, said merging two companies known for low consumer satisfaction wouldn’t quickly amend lasting network problems.
“We have the potential of merging two networks that receive low marks for call quality and data,” he said. “I’m not sure merging these is going to create any meaningful gains for consumers in terms of voice or data quality. It’s a financial deal at the end of day; they don’t necessarily have the consumers in mind.”
Randall Stephenson, AT&T’s chairman and CEO, disagrees. He said the merger would deliver “significant customer, share owner and public benefits” that could only be attained through the combination of the companies with “complementary network technologies, spectrum positions and operations.”
AT&T said customers would see service improvements, including improved voice quality, as a result of additional spectrum, increased cell tower density and broader network infrastructure.
Spievak was skeptical and predicted an end to unlimited data plans.
“It is likely we will see consumer prices go up and quality go down,” he said. “There’s nothing in this transaction that will make AT&T’s network quality better.”
He said the carriers are looking to gain pricing control and can get more leverage out of accessories and other components.
“From a business perspective it makes sense,” Spievak said. “The likely losers are consumers over time because there will be less competition for mobile phone dollars, less innovation and poorer customer care.”
T-Mobile gives its consumers the option to buy phones with or without contracts, attractive features such as mobile hot spots and Wi-Fi calling in weak-coverage areas, and has consistently won J.D. Power & Associates awards for customer service.
Ralph De la Vega, president and CEO of AT&T Mobility, said T-Mobile would keep its current pricing structure. On the contrary, Herbert said T-Mobile’s customers most likely would suffer because AT&T may force customers to sign long-term contracts.
But Seybold argued the deal would put pressure on Verizon, which would show up in price reductions for everybody. And Herbert, Seybold and Spievak agreed that the pressure soon would lead to a Verizon and Sprint merger.
“My initial reaction to the deal was, ‘Wow, Sprint needs to do something fast,’” Herbert said.
Seybold predicted the merger would cause wireless high-speed Internet service provider Clearwire to run out of money by the end of the year.
“We will lose another network, Verizon will probably make a plan to buy Sprint, and we will be left with two super-networks,” he said.
As of Sunday, Verizon had 31.3 percent of the U.S. wireless market share, AT&T had 26.6 percent, T-Mobile had 12.2 percent and Sprint had 11.9 percent, according to ComScore. Cricket, MetroPCS, TracPhone and U.S. Cellular account for the other 18 percent.