AT&T and T-Mobile Merger - By Esha Sharma

The latest buzz in the mobile industry is about the AT&T’s astounding $39Bn takeover deal for T-mobile USA. The main rationale for AT&T behind this takeover is they need T-Mobile to increase LTE network coverage from 80% to 97% of the population. AT&T is at present the second largest network operator in US, with T-Mobile at the fourth position and Verizon topping the list.

Impact on AT&T post merger:

1-    The synergies achieved by combining AT&T and T-Mobile: network compatibility (GSM/HSPA+/LTE), access to incremental spectrum, economies of scale, and retail footprint expansion is very lucrative and crucial for extraordinary broadband experience to customers.

2-    The merger would allow AT&T to corner the US Global System for Mobile Communications (GSM) market, making AT&T the only operator to support the globally adopted GSM standard.

3-     The merger will force the rest of the wireless telecom industry to compete with AT&T’s improved and growing network and this may lead to really low prices. As AT&T has been the leader in its development of emerging devices through its emerging devices division, so the competing companies might try to come up with innovative emerging devices in wireless include cell phones, e-readers, tablets, and even pharmaceutical pill caps etc.

Impact on T-Mobile

1-    T-Mobile offers customers unlock codes for their phones especially when customers are traveling out of the USA.

2-     The acquisition is going to affect some employees and possibly increase the unemployment in the Country.

3-    There won’t be iPhone for the current T-Mobile customer but in the future there should be that option.

4-     AT&T doesn’t offer unlimited data plan whereas T-Mobile does. This is going to affect T-Mobile customers.

Points of Concern:

1-    Effect of the merger on the competition and consumers

2-    Effect on neutrality rules which exempt wireless broadband from restrictions. Net neutrality basically prevents large corporations from marginalizing smaller companies that threaten their profits or promote an opinion that is dissenting from the popular one. Since more and more people are using their phones to access internet so protecting net neutrality for wireless broadband is important.

3-    Reallocation of the spectrum to be done from TV broadcasters and its impact

4-    Impact on regulations and initiatives like AllVid- the proposal for a device that would allow consumers to integrate different systems into one interface

Stakeholders of AT&T and T-Mobile merger

  

Consumers
I think customers are going to be the biggest losers as the cheap voice and data plans offered by T-Mobile stand under the threat of being closed down. Moreover as the competition is going to reduce post merger so the prices may not remain as low as they have been.

Phone Handset Makers

There are currently 2 major carriers who buy the GSM- based phones from handset makers- HTC and Motorola. This merger may prove against the interests of the phone handset makers as the will lose control over the prices and hence profits because of a single player post merger.  Even with LTE becoming the standard for 4G, there will be only 3 major players in the market and hence the profits of the handset makers will be at peril.

Sprint
Sprint is the 3rd largest carrier in USA and this merger will push it further to the bottom position. In order to regain it's position in the market, Sprint will have to invest more.

Network Equipment Suppliers

Moreover the network equipment manufactures and suppliers  won't be untouched from the impact of the merger. Alcatel- Lucent, Erricson and Nokia Siemens are the suppliers to both AT&T and T- Mobile, because of the carrier consolidation these companies will also lose their control over prices and hence profits.

Google
Google  will also be affected by the merger as T-Mobile is Google's good partner for Android OS- based devices. Now since the market is heading towards consolidation so Google may fear the Big-wigs- Verizon and AT&T may come into Android domain in the future.

Pros of the merger:

1-    To enhance AT&T’s coverage in many areas of the US, especially in San Francisco, where the number of cell phone towers is expected to go up by 30 percent. This will obviously result in better network and notably fewer dropped calls.

2-    Benefits from a projected deployment of high-speed broadband to over 97% of the population and better service for existing AT&T and T-Mobile customers

3-    More efficient integration of available spectrum from both companies .Since both AT&T and T-Mobile run the same GSM technology. Hence, they are compatible with each other and can be integrated with much less effort than otherwise. This means that subscribers will not be much affected by the shift in mobile carriers. AT&T has stated that T-Mobile customers will most probably be able to use their existing handsets even after the merger is done.

4-     AT&T is the only unionized wireless company in the country and the merger would ensure that 20,000+ T-Mobile workers would have the chance to join the 43,000 currently unionized AT&T Mobility employees with decent wages and legal protections on the job.

5-     The merger would enable both the companies to jointly offer the much more advanced, next-generation LTE to a lot more subscribers in the USA.

6-    T-mobile is a dying company, financially speaking; which is why they agreed to merge with AT&T. This merger will only save jobs at T-mobile
7-    The iPhone will finally arrive for T-Mobile customers in about 12 months, although you'll all be AT&T customers by then. Nevertheless, you have to wonder if AT&T won't use the T-Mobile acquisition as an opportunity to entice outmoded feature phone and smart phone users to upgrade to newer devices.

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Cons of the merger:

1.   The merger will lead to more expensive tariffs and plans.

2.    This may also lead to the end of low-cost mobile phone and data plans that T-Mobile subscribers enjoyed

3.    The merger would create only 3 major mobile phone carriers in the US, namely, AT&T, Verizon and Sprint. Each of these would resultantly own about one-thirds of the mobile market share in that country.

4.    The merger would thus create a saturated market, which in turn would lead to lower consumer choice and higher costs.

5.    Lack of adequate competition would finally lead to lack of innovation and therefore, lack of quality services for the customer.

6.    The process of the merger could take a long time to complete, what with AT&T having to gain approval for the same from the FCC and the Department of Justice.

7.    The merger will probably also lead to a drop in customer satisfaction for subscribers of T-Mobile, which has a reputation for providing better customer service than AT&T

8.    There’s no doubt there’s going to be some rationalization in staffing, mostly in the consumer marketing and networking engineering area                                                                                       

    There are chances that T-Mobile’s gutsy approach to expanding its smartphone lineup will be killed by AT&T’s stodgier culture.   A look at the T-Mobile and AT&T data coverage maps shows that T-Mobile won't add much to AT&T in terms of coverage area