Since AT&T officially announced that the deal between T-Mobile and AT&T was officially off
due to regulatory roadblocks, they are now beginning to fulfill their contractual obligations as a result of the deal.
As many T-Mobile and AT&T customers were aware, AT&T and Deutsche Telecom had entered into a deal where AT&T would take T-Mobile USA off of the hands of the German telecom giant. This deal was supposed to amount to a $39 Billion acquisition of T-Mobile and would ultimately result in, what AT&T claimed, better coverage and service to both AT&T and T-Mobile customers. Having knowledge of both companies and their current and past strategies, we at BSN* had called from the very start that this merger would not be possible and would be shot down in regulatory review. If you'd like more details on the reasons for the failed bid we recommend checking out our previous coverage:
Phase 1: Announcement of the deal
Phase 2: Not that fast - Buyout has big problems
Phase 3: The Deal Fails
Why was any of this in T-Mobile's favor? Well, the real truth is that T-Mobile negotiated themselves probably the best post failed acquisition terms we've ever seen. As we reported in the past, T-Mobile had negotiated a $4 Billion compensation package which included $3 Billion in cash and $1 Billion in spectrum.
While we believe that this deal probably had some chance of regulatory approval, there were far too many factors against it from the very beginning. We believe that Deutsche Telekom AG saw this and likely negotiated such a compensation package that it effectively granted them a re-boot in the American market once the deal fell apart. This entire deal was really hinging on the fact that AT&T was trying to piggyback on Obama's vision of broadband everywhere as well as the fact that they promote union jobs. Both of those factors proved to be eclipsed by the sheer fact that AT&T would have more than a majority in many metropolitan markets. Even with divestment from those markets, AT&T and T-Mobile shared far too many metropolitan markets. Not to mention the fact that AT&T and T-Mobile are the only two options for GSM devices meaning visiting foreigners would eventually have been left with only one choice.
So, where does this leave T-Mobile now? Well, with the news that AT&T is now transferring $1 Billion worth of spectrum to T-Mobile
and the fact that they're getting $3 Billion in cash, this signifies a chance for T-Mobile to experience a rebirth and allows for them to get a competitive edge over competitors like Sprint. We're not sure whether or not they'll be able to compete with AT&T or Verizon, but there's a good chance that they could steal share away from AT&T in markets where they are already competing with AT&T. T-Mobile can easily lure AT&T customers away by continuing their value proposition and by improving their device selection. Customers will eventually get tired of AT&T's ever increasing prices and sometime spotty data networks.
The timing of this spectrum transfer is certainly interesting considering how busy December really was. Around the same time that AT&T had officially announced the breaking-off of the AT&T and T-Mobile merger, AT&T also had announced that they had finalized the $1.9 Billion acquisition of Qualcomm's UHF spectrum
which they had put up on sale after the failure of their MediaFLO business spin-off
Right now, when LTE
is still in its fledgling years it is T-Mobile's time to spend as many resources as possible in order to compete directly with AT&T and Sprint. Sprint isn't due to go LTE until much later this year, since they hung on to the failed WiMax spectrum for far too long. And AT&T's LTE network still remains to be a real network as it is only available in a few markets here and there. The real challenge, though, will be the constant barrage of false '4G' marketing by ALL carriers and the fact that T-Mobile is still the only major US carrier without the iPhone.
T-Mobile must make their network just as robust as Verizon's and prove to consumers that they do not have to pay AT&T and Verizon prices in order to get good service. If they can drive this message home and actually prove to consumers that their network is strong, there's a likelihood that this failed merger really could result in T-Mobile creeping their way into the top 3.
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