Leaked Letter Raises Questions About AT&T’s Merger Motives

A partially redacted letter supposedly sent from AT&T to the FCC has raised new questions about the pending merger between AT&T and T-Mobile, bringing to light the money at stake and whether the merger is necessary, as AT&T claims, to expand wireless broadband coverage.

Since February, AT&T, the second largest mobile network in the U.S., has been pushing for approval to acquire T-Mobile, the fourth largest, for approximately US$39 billion. The announcement was met with fierce opposition from other networks, most notably Sprint, who said the merger would create a duopoly among carriers, stifle competition and lead to poor service. Consumer advocacy groups also spoke out against the largest wireless companies becoming even larger and more powerful.

From the beginning, though, AT&T argued that the merger wouldn’t lead to poor service — actually, it was needed to guarantee the company could expand coverage to a rapidly growing consumer base whose need for higher-speed networks and spectrum coverage was expanding exponentially. In the initial filings and subsequent arguments in favor of the merger, AT&T claimed that without a merger it wouldn’t have the capacity to extend high-speed coverage to most of the country.

Tech companies like Microsoft and Facebook, which need high-speed, strong connections to support their products, came out in support of the merger, saying the digital marketplace was evolving and allowing for an acquisition that would increase coverage was essential.

How Bad Is the Leaked Letter?

However, the recently leaked letter, which has since been removed from its original spot on the FCC website but was later republished by DSLReports, calls into question whether the sole motive for the merger is to expand coverage. In the letter, AT&T claims it would have to pay $3.8 billion to expand 4G LTE coverage to 97 percent of the U.S. population, 17 percent higher than its current 80 percent. It’s a staggering sum, but nowhere near the $39 billion it would hand over to buy T-Mobile in the event its acquisition is approved.

The redacted letter also suggests Sprint had been toying with the idea of acquiring T-Mobile before AT&T was, making it the competition AT&T has alluded to, though never by name, when arguing on behalf of the merger.

The letter appears to suggest that AT&T is paying 10 times the amount of acquiring T-Mobile to keep it out of a competitor’s hands rather than to expand its own coverage capability, although the company said the expanded coverage isn’t possible without the merger.

“Our latest letter to the Commission is fully consistent with AT&T’s prior filings. This letter makes clear the dramatic scale of our commitment to bring 4G LTE mobile broadband to 97 percent of all Americans, and that without this merger AT&T could not make this expanded LTE commitment,” an AT&T spokesperson said in a statement provided to the E-Commerce Times by company representative Kate Tellier.

Although Sprint and other companies have argued that it’s possible for AT&T to expand without the merger, AT&T says increased spectrum and the merger must go hand-in-hand.

“That’s because the unique network synergies of the combined network far exceed the sum of all its parts, and generate the functional equivalent of a new spectrum, which is the best means of addressing the macro-level, system-wide constraints confronting AT&T,” said the AT&T spokesperson.

Merger Is a Solid Bet

Since the merger is still in its preliminary stages, terms are far from being set, and both companies will have to jump through legal hurdles and barriers before anything is final, making this letter just another bump in the road.

Even if this letter reveals the merger isn’t necessarily rooted in expanding coverage, AT&T has plenty of reasons to want a merger to go through besides increased capabilities.

“I believe that the scale benefits of the merger are relatively straightforward to project,” Aapo Markkanen, senior analyst in consumer mobility ABI research told the E-Commerce Times. “Network investment, retail footprint, handset procurement, service pricing and marketing — that’s pretty much what today’s telcos are made of.

“Besides those, there aren’t that many strategic variables that are anymore in their own control,” Markkanen added. “If, let’s say, Microsoft and Facebook, or Zynga and Rovio, were to merge, they would have a lot more unknowns, but for telcos, the post-merger futures are a good deal clearer and quantifiable.”

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Intuit’s $12B Mailchimp Purchase Breathes New Life Into Email Marketing

Intuit on Monday announced an agreement to acquire Mailchimp, a global customer engagement and marketing platform for small and mid-market businesses, for $12 billion in cash and stock advances. The purchase could be the linchpin that thrusts the mostly financial software company into solving more fertile mid-market business challenges for its customers.

The planned acquisition is part of Intuit’s mission to become an AI-driven expert platform. With the acquisition of Mailchimp, Intuit will accelerate two of its previously-shared strategic big bets: to become the center of small business growth and to disrupt the small business mid-market, said the company in its announcement.

Intuit’s acquisition of Mailchimp sends a great message to all entrepreneurs around the globe that venture capital is not always necessary, observed Michael Kawula, co-founder of CBA, a marketing agency for YouTube monetization. Mailchimp is a bootstrapped success story that has not raised any outside venture capital.

“This is a very clever growth strategy for Intuit, who wants to get in front of SMBs, which is difficult and expensive. Similar to HubSpot’s recent purchase of The Hustle newsletter, a much smaller acquisition, this also is brilliant,” he told the E-Commerce Times.

The acquisition marks a significant impact in industry, according to Osiris Parikh, sales marketing manager at Lilius. He also sees the deal as another reminder that email marketing is not dead — and data is power.

“Intuit has made a strong move to broaden its portfolio and become a leader in catering to the needs of SMBs. It is also a great story of success during Covid-19,” he told the E-Commerce Times.

Deal Basics

Intuit provides a global technology platform that makes TurboTax, QuickBooks, Mint, and Credit Karma. Intuit and Mailchimp will offer an innovative, end-to-end customer growth platform that allows customers to get their business online. It will also enable them to manage marketing, customer relationships, payment processes, and access insights and analytics, along with optimizing their cash flow and staying compliant with experts at their fingertips, according to Intuit.

Key to this process is Intuit’s ability to enable businesses to combine their customer data from Mailchimp and QuickBooks’ purchase data to get the actionable insights they need to grow and run their businesses with confidence.

“We’re focused on powering prosperity around the world for consumers and small businesses. Together, Mailchimp and QuickBooks will help solve small and mid-market businesses’ biggest barriers to growth, getting and retaining customers,” said Sasan Goodarzi, CEO of Intuit.

Mailchimp brings to Intuit technology at scale along with global customer reach.

Founded in Atlanta, in 2001, Mailchimp began by offering email marketing solutions. The company evolved into offering customer engagement and marketing automation processes fueled by an AI-driven technology stack. Mailchimp’s data and technology spans 70 billion contacts and more than 250 rich partner integrations. Its AI-powered automation at scale fuels 2.2 million daily predictions.

“Over the past two decades, we have vastly expanded and evolved Mailchimp’s platform to help millions of small businesses around the world start and grow,” said Ben Chestnut, CEO and co-founder of Mailchimp.

Why Mailchimp’s Worth It

While the email marketing sector is pretty crowded, Mailchimp stands out in terms of size and scope. The company reportedly has 13 million total global users, 2.4 million active monthly users, and 800,000 paid customers, noted Charles King, principal analyst at Pund-IT.

“Plus, half of its customers are outside of the U.S. Additionally, while people tend to focus on the mass/might of large enterprises, small businesses are really the heart and soul of most economies,” he told the E-Commerce Times.

The acquisition likely represents a lucrative opportunity for Intuit to integrate Mailchimp data with QuickBooks and provide greater analytical capabilities to customers. The synthesis of financial and marketing data in this case provides valuable and actionable insights about an organization’s clients, added Lilus’ Parikh.

“It’s also a great diversification of offerings to centralize SMB operations through one platform and benefit from Mailchimp’s established user base,” he said.

Another supporting factor for Intuit’s interest in Mailchimp is the renewed stature of email, according to Elice Max, co-owner of EMUCoupon and someone who has been involved in online marketing for eight years.

“Email marketing has made a comeback in recent years. With increased digitization caused by the pandemic, all digital mediums including email have gained a renewed importance,” she told the E-Commerce Times.

Email Marketing’s Resurgence

Technology giants are looking to build more integrated and holistic solutions. Microsoft recently bought Clipchamp, a video production tool. Both companies are looking to build platforms for the new tech-savvy SMBs, Max Suggested.

“More than anything, it means a renewed confidence in the field. Experts have been talking about the death of email marketing for a while now. But a $12 billion acquisition by a big player like Intuit means email promotion is alive and kicking,” she said.

Another factor is Intuit keeping its eye on the ball. It is important to remember the significance of Mailchimp as the pioneer in marketing automation and email marketing in particular.

“Intuit is looking to make a statement that it wants to become more than a financial software company,” Max observed.

QuickBooks Synergies

One of the motivations that lies behind Intuit’s purchase of Mailchimp is its desire to lead a revolution in the CRM capabilities of SMBs, according to Will Ward, CEO of Translation Equipment HQ . Think about the effect the pandemic has had on the popularity of remote work and the amount of remote SMBs being established.

“You would expect there to be a lot of growth potential here in the next few years. With Mailchimp and QuickBooks, Intuit is providing an end-to-end customer growth platform, and with around $20 billion invested already its belief in SMBs is evident,” Ward told the E-Commerce Times.

Like any other system that handles transactions such as orders and payments, you need to work closer to the actual customer channels. With the Intuit e-commerce product, launched about a year ago, this seems like a natural step by adding marketing automation and reaching out with its e-commerce offering to the MailChimp customer base, suggested Johan Liljeros, general manager and senior commerce advisor, North America for Avensia.

“The acquisition has added synergies between the platforms while still being able to operate as independent platforms. Looking at Intuit’s offerings, it appears they are moving towards expanding [into] digital transactional experience,” he told the E-Commerce Times.

Final Thoughts

Email marketers should be ready for disruption along with other business services providers. Intuit has been both savvy and aggressive in the way it built its business, effectively becoming the 800-pound gorilla of small business accounting and tax solutions, according to Pund-IT’s King.

“With that kind of ally behind Mailchimp, life is going to become a whole lot more ‘interesting’ for other email marketers,” he predicted.

The Intuit-Mailchimp deal should offer Intuit customers significant benefits, such as new solutions and services for bolstering their businesses. At the same time, the deal highlights the fact that old technologies can continue to be vital and dynamic.

“For years, many have claimed that email is dead or dying and quickly being replaced by whatever the tech du jour happens to be. Mailchimp — and now Intuit — beg to differ,” King quipped.

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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