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AT&T's takeover of T-Mobile would create largest U.S. carrier

Matt Hamblen, Computerworld | March 20, 2011
AT&T plans to buy T-Mobile USA for $39 billion in cash and stock, easily making AT&T the nation's largest wireless carrier, ahead of top-ranked competitor Verizon Wireless, and reducing the number of major national wireless carriers from four to three.

Shortly after the takeover was announced, consumer rights group Free Press issued a statement condemning it. "Don't believe the hype: There is nothing about having less competition that will benefit wireless consumers," said Free Press research director S. Derek Turner. "And if regulators approve this deal, they will further cement duopoly control over the wireless market by AT&T and Verizon."

Turner noted that the top four companies already control 90% of the wireless business. If two of the four merge, that means "nothing but higher prices and fewer choices, as the newly engorged AT&T and Verizon exert even more control over the wireless Internet."

Jeffrey Kagan, an independent analyst, said he doesn't think the acquisition will have a negative effect on pricing, since there will still be three major players in the market. "Ultimately, [the merger] will be approved," he said. AT&T will invest more in network expansion because of the takeover, Kagan said, so both customers and investors will be "happier."

He pointed to problems in keeping up with data demands of the iPhone when AT&T was the device's exclusive wireless carrier, which created an image that AT&T didn't want.

Jack Gold, an analyst at J.Gold Associates, said he is unsure whether regulators will automatically go along with the merger, because it significantly limits competition.

"It is highly likely that data rates will increase," he said. "The bottom line is that this is probably good for current customers of AT&T and T-Mobile, as it will ultimately result in better network coverage, but in limiting the competition, it will also probably result in higher prices."

AT&T Chairman Randall Stephenson said the transaction represents "a major commitment to strengthen and expand critical infrastructure for our nation's future." AT&T will increase its infrastructure investment by more than $8 billion over seven years, he said, and will be able to extend its plan for LTE coverage to an added 46.5 million Americans across 95% of the U.S.

With the acquisition, AT&T will immediately gain cell sites that would have taken on average five years to build without the transaction, the carrier said. It said its mobile data traffic grew by 8,000% over the past four years and will be eight to 10 times greater in 2015 than it was in 2010.

Both companies use a GSM-based HSPA network, although T-Mobile announced HSPA+ speeds in January that would technically make it faster than AT&T. AT&T is moving its subscribers to LTE in the next two years, expecting the first rollouts later this year.


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