AT&T Fails in Bid to Acquire T-Mobile

By Tony Rizzo, Editor in Chief — December 20, 2011

Wireless data consumption is growing at an enormous – some might even say at an insane – rate, and it is a real question whether AT&T or Verizon is up to the real challenges of meeting this growth. AT&T's proposed acquisition of T-Mobile might have ultimately provided the necessary capabilities AT&T may not be able to muster on its own.
 
Now AT&T will need to pony up not only $3B to T-Mobile USA parent Duetsche Telecom AG, but a relatively great deal of spectrum rights as well. That is a hefty break-up fee. 
 
Some of us would have preferred the big 2 and the little 3. It would not really have changed the competitive landscape. Since Verizon and Sprint both use the same network technologies (arguably, Sprint has the most state of the art wireless capabilities, along with true unlimited data plans) would it have been long before we only have the big two left? And is there really any difference between having these 4 competitors today or the inevitable 2 that would have ultimately resulted?
 
AT&T’s network has been a serious laggard, especially relative to other countries. Period. When is 3G not 3G? When it’s AT&T. When is 4G not 4G? Most emphatically when it’s AT&T. That’s not to say that T-Mobile doesn’t suffer from its own GSM-based issues. In truth the two networks are mostly in lockstep with each other from a technology perspective. True 4G simply will not happen until both companies move into full scale LTE – that is the bottom line on 4G here.
 
A great many "consumers" have already voiced their opinions on the deal – many, if not most, collectively run along the lines of…"Hey, I was just about to drop AT&T and go over to T-Mobile…now I’ll just end up with the same bad customer service, the same higher costs and the same less overall services I’ve always had with AT&T…or maybe I’ll go to Verizon."
 
It misses the real point though. 
 
The real question that needed to be answered was whether or not the combined AT&T and T-Mobile can deliver – on a very timely basis – the true next generation wireless network. Would the merger have led to a true 4G (LTE) wireless environment with rock solid coverage across most of the civilized wireless USA world? AT&T needs to give Verizon real technology competition. That is the competitive layer that truly matters – and it is the only competitive layer that will ultimately lead to real and substantive gains in net wireless bandwidth and quality of coverage.
 
Sharp Focus on LTE and 4G
 
Pure next generation wireless technology is the ONLY issue worth debating. For enterprises already living in a mobile world  - and for consumers from the perspective of these consumers as enterprise customers – business success hinges on the availability of true 4G bandwidth over the rest of the decade. Verizon has a real technology lead on speeds and feeds and general coverage scope (there’s a map for that). But it also has its own technology issues. AT&T and T-Mobile have had to "paper over" through marketing gimmicks what their networks are really capable of in order to at least give the illusion of maintaining parity with Verizon. Verizon has been and remains a small step ahead on bandwidth – an edge that continually threatens AT&T’s business.
 
Does the equation make sense? Yes, it does.
 
So, aside from all of the headline grabbing antitrust noise, what should have been explored in depth is whether or not AT&T and T-mobile might have quickly deliveed on the true 4G technology and expanded their coverage to truly compete with Verizon. Both the mobile enterprise and consumers would have won had this been the case.
 
Is true 4G really that important? Yes, it is. Wireless data growth will indeed be insane – it is on an enormous uphill trajectory, and the key wireless carriers MUST be able to handle it all. Wireless expense management (WEM) is clearly going to be a critical component of your mobility planning.
 
Will costs rise? Very likely costs would have increased somewhat, at least initially. Later on, however, as AT&T and Verizon ended up going head to head with true 4G service, the speeds and feeds issue would have fallen out of the equation and the two would have needed to compete directly on price and value-added services. And they will.
 
Enterprises, meanwhile, need to plan out a long term strategy relative to negotiating their wireless data costs. As the entire world rapidly goes mobile wireless data costs become the real elephant in the room – being caught unprepared is not going to win you any friends.
 
The demise of the AT&T deal will ultimately cost enterprises and consumers.

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