What Happens to T-Mobile's Enterprise Customers?

By  Jessica Binns

Last week, AT&T announced its plan to acquire T-Mobile from parent company Deutsche Telekom for $39 billion. What’s in store for enterprise customers with T-Mobile contracts?

In the days before smartphones were a ubiquitous staple of enterprise business, most companies simply didn’t have policies for mobile devices, which at the time generally entered a business through the administrative ranks. Companies such as telecom expense management firm Tangoe emerged to take control of that chaos, explains Robert Whitmore, SVP of strategic consulting, Tangoe. Employees with mobile devices got accustomed to certain wireless carriers in their regions, and enterprises found those “personal allegiances” hard to break, which is why today some companies have contracts with all four providers.

These days, it’s common to find enterprises with primary and secondary wireless contracts. For large U.S. enterprises, T-Mobile tends to be a secondary carrier. “If Verizon is the incumbent carrier, T-Mobile may be brought in if lots of your employees travel internationally and you need to think about roaming, VoIP calls, and things like that,” says Whitmore.

A company with headquarters in Europe may be more likely to prefer working with T-Mobile in the U.S. due to an existing relationship with parent company Deutsche Telekom.

T-Mobile tends to have enterprises business in very specific niches, primarily with customers who are concerned about controlling costs. Its “rack rate” is lower than what a company might receive through a custom negotiation with AT&T or Verizon. However, large business customers can negotiate with Verizon, Sprint, and AT&T and get very close to T-Mobile’s rates, says Whitmore.

“T-Mobile hasn’t done well in the enterprise space–they haven’t convinced enterprises that they’re as viable as AT&T or Verizon. They haven’t built infrastructure or support staff for enterprise customers. They’re not perceived as an enterprise-grade partner,” says Whitmore. But for businesses that work primarily with Verizon or Sprint, having a GSM carrier in their wireless portfolios is important for employees who travel overseas.

“You’re not going to find companies investing more in T-Mobile services,” Whitmore explains. “They’ll put their contract out for bid again. AT&T’s goal probably is to shut down legacy T-Mobile contracts and switch them to higher AT&T rates.” If deal doesn’t go through, T-Mobile will be a “sitting duck,” due to lost business, Whitmore says, although the $3 billion “breakup fee” will help.

Phillip Redman, VP of network services and infrastructure, mobile and wireless at Gartner, says AT&T’s current enterprise customers should pressure the carrier to maintain T-Mobile’s international pricing and support and ensure that they benefit as much as possible from the acquisition.

Redman says AT&T will have to abide by any T-Mobile enterprise contracts that are signed. “Some companies have agreements that if the carrier they’re using is acquired, they may be able to break the contract without penalty,” he adds.

Since T-Mobile’s pricing has always been competitive, the carrier tends to be the “vendor of choice” for SMBs. “T-Mobile gets highest marks for service from small companies,” Whitmore says. “SMBs should stay the course, as we get closer to understanding what’s going to happen, and see what AT&T is going to do.”

Whitmore sees other providers stepping in to become the new “low-cost value carrier. It could be Sprint, it could be LightSquared. That will take shape over the next 6-12 months. But whichever company it is—it needs to have a hefty U.S. footprint.”

Redman agrees. “This deal also positions Sprint Nextel well as the largest ‘value play’ in the U.S. market. We believe it will also push Sprint to look at a merger strategy outside the wireless market—for example, Sprint may look to merge with cable operators or small carriers, such as U.S. Cellular,” he says.