What Happens to AT&T and T-Mobile Now? Congressman Boucher Weighs InBy: Abby Johnson - January 20, 2012
Last month, AT&T withdrew its bid to purchase T-Mobile USA from Duetsche Telekom after a lot of criticism, especially from the Department of Justice and the FCC. The merger did receive a lot of support, but the criticism proved to be louder.
Were you for or against the AT&T/T-Mobile merger? We’d love to know.
Former Congressman and Internet Innovation Alliance Honorary Chairman Rick Boucher supported the merger, as he explained in this previous interview with WebProNews, because he believed it would help spur innovation, the economy, and jobs. We recently spoke with him again to talk about the implications of the deal not going through.
“I was not surprised by that decision given what had happened prior to the time that the application was withdrawn,” said the Congressman.
He went on to explain that the merger would have brought an “improvement that we desperately need.” If you remember, one of the goals of the merger was to bring high-speed broadband connections to 97 percent of the U.S. in 6 years, which would have nearly fulfilled President Obama’s broadband plan. Since the deal fell threw, Congressman Boucher told us that, in order for the President’s goal to still be met, the government would have to step in with an investment.
“In this era of concern about deficit spending, finding those investments is going to be very difficult,” he said.
As for AT&T, Congressman Boucher told us that he thinks the company will still try to meet the goals it set with the merger in mind, but that it would take a lot longer than 6 years to fulfill them. Through T-Mobile, AT&T would have saved significantly in its effort to enable 4G, but now, it needs to come up with the monies on its own.
“My guess is AT&T, at this point, is going to focus on strengthening its network in its core areas building out its 4th generation technology on an incremental basis of market-by-market, as it is an opportunity for that investment to realize the highest rate of return,” the Congressman explains. “Instead of it happening within 6 years on a nationwide basis, undoubtedly without the merger having occurred, that may now take a somewhat longer period of time.”
Some reports have indicated that AT&T has been talking with several owners of 700 MHz licenses and is in the process of acquiring them as part of its backup plan in case the T-Mobile deal fell threw. This may very well be true since the company is in need of more spectrum.
The Congressman is also optimistic about T-Mobile saying it is in a “very strong position to be a viable competitor.” However, he did say that it would have challenges with deploying 4G.
“The challenge that T-Mobile faces is acquiring the capital that is necessary to deploy 4th generation technology across its network,” he pointed out.
While AT&T did have to pay T-Mobile $4 billion ($3 billion in cash and $1 billion in spectrum rights), the Congressman said that T-Mobile would still need considerably more financing. What’s more is that T-Mobile’s parent company, Deutsche Telekom, had said, prior to the merger, that it wanted to exit the U.S. market and was not going to invest in it further. If this is still the case, T-Mobile could have a tough road ahead.
Since the future of T-Mobile is still in question, there have been some speculations about whether or not AT&T will make another attempt at buying the company. Congressman Boucher told us that, at this point, it seemed that the companies were headed in two different directions.
Sprint has also been mentioned as a potential buyer of T-Mobile, but the Congressman thinks such a merger would face the same scrutiny that the AT&T/T-Mobile did.
“I think it’s gonna be very difficult for any of the major carriers to purchase T-Mobile, given the position of the Department of Justice and the FCC,” he said.
Speaking of major carriers, he said it would be “impossible” for Verizon to make such a purchase. If a carrier were to purchase it, the Congressman thinks it would have to be smaller than T-Mobile.
Another possibility would be to sell T-Mobile in parts, which is not what Congressman Boucher considers to be a good decision.
“This is a world where business dominates,” he said. “I think Deutsche Telekom will make its decision very carefully based upon the relative value of the business offers that are made.”
In terms of the mobile industry as a whole, Congressman Boucher told us that the merger not going through was negative for mobile, consumers, and the economy.
“The long term impact is that we don’t get the deployment of 4th generation technology to 97 percent of the American public within the next half decade,” he said. “I think that’s the major negative impact.”
“Wireless technology was the answer,” he added. “We were going to bring broadband to the broadband have-nots – I’m not sure what the answer is now.”
What do you think the next steps will be not only for AT&T and T-Mobile, but also the mobile industry? Please share your thoughts.