So you’ve heard that AT&T Mobility wants to merge with T-Mobile. There are two main questions on everyone’s mind: Is this deal good or bad, and will it happen or not?
Whether it’s good or bad, of course, depends on your perspective. It will be good for some and bad for others. I have heard many opposing opinions on this merger.
While I initially thought it was just another deal that would be approved, I began to realize that many questions needed to be considered.
I’ll consider the pros and cons of the AT&T-T-Mobile deal, and then in my Pick of the Week section, I’ll tell you about Lightsquared.
As the next several months pass, there will be a lot of debating over AT&T and T-Mobile. This is just the beginning. An exploration of some of the arguments for and against this deal will hopefully make it easier for you to decide which side you are on.
At this early stage, I believe this merger can be approved. However, it will be a sticky mess before the companies get there.
The question is this: What price will AT&T ultimately pay? Based on what I’ve heard so far, I have a feeling it won’t be cheap. Approval will likely come with a hefty price tag that will affect investors, customers, competitors and suppliers.
This last week has been exciting, and we just started this game. I gave countless interviews with newspapers, magazines, television and radio stations. (You can read many of them on my website.) Like yours, perhaps, my opinion has already begun to mature over the last week — and it will likely change over the coming months as both sides talk.
This is a very large deal that will have long-lasting impact on the entire industry. This is not just about AT&T.
This is one of those industry-reshaping events, so I think it is important to ask the right questions and make sure we think of everything before regulators decide yes or no. Even with all that thinking, we will not get it all. We never do. The industry continues to change, and unexpected results often occur.
Many think this is a good deal, and many think this is not. The funny thing is, they are both right. AT&T and T-Mobile executives love it. Sprint Nextel does not. Verizon Wireless so far does not have much of an opinion but is not opposing it. AT&T investors seem to love the idea. Investors in many smaller competitors don’t.
Customers love and hate the idea. They love the idea of more spectrum and capacity improving their connection because they have had problems in the last few years. Some T-Mobile customers are happy because they see an improvement in their service.
On the other hand, T-Mobile customers are generally happy with their existing service, while AT&T customers are not as happy. Workers and executives at T-Mobile are generally not happy, because many of them will be cut.
Sprint Will Fall Behind
When we listen to AT&T or T-Mobile, all we hear are the good reasons for this deal to get done. That’s fair enough since they want it. However, it is just as important to listen to the many arguments against the deal. Then weigh them and compare them. Then put them in order, most important to least important.
We have seen this industry transform itself over the last decade. In the 1990s, we had dozens of smaller, regional industry competitors. Today, after waves of mergers, we see fewer, larger, national players.
If anything, it seemed Sprint and T-Mobile would get together. They have been talking off and on over the last several years. This deal with AT&T surprised everyone.
If Sprint had acquired T-Mobile, it would have produced a very different result. It would have increased the size of the No. 3 competitor, and the result would have been a more competitive three-way race. That would have been good — and easier to get done.
Instead, this current proposal would turn AT&T into a bigger giant, followed by Verizon, which is also a giant, and it would leave Sprint even further behind than it is now. That is not good and will make this deal tougher.
I originally thought there were plenty of competitors. There would still be a big three, plus a few smaller competitors. However after listening to the arguments against the idea, and after thinking this through over the last week, I am starting to realize that is not the case.
Instead it will be the big two — AT&T and Verizon — with their wireless and wireline businesses competing with each other. Sprint will be a very small player in comparison, even though it has been recovering.
That is another interesting part of this story. If Sprint were still struggling the way it was a few short years ago, this deal wouldn’t stand a chance. However, now that Sprint is recovering and looking better and stronger, AT&T and T-Mobile have the guts to try to get together.
Serious Scrutiny Required
This deal will save AT&T’s bacon. It was the first to go into smartphones full force — before competitors who are still trying to catch up. This flood of Apple iPhone traffic started a data bottleneck at Ma Bell that the company still hasn’t fixed.
Extra spectrum is just what AT&T needs — it’s not just about size. It’s also about good quality service. This will give the company the spectrum and the wiggle room it needs, for now. Until it overloads again anyway.
Customers often complain about AT&T quality and service, but the company is still growing rapidly, so this does not seem to be a real problem.
These are all long-term questions and they require long-term answers. Unfortunately, this merger is a short-term fix. One step at a time, however. This will turn AT&T into the largest competitor once again. The next step may be what my Pick of the Week is about at the end of this column.
I have been asked another interesting question. Will they stay in Atlanta? I have heard they may be moved to Dallas. Who knows? Much of the decision-making is already there. If so, that would be a big blow to Atlanta.
I am not saying AT&T’s merger ambitions should not be permitted. I am just saying there is so much more to be considered and debated this time around. Previous mergers were approved because there were still so many competitors. Now, however, the competitors are small in number. There are only AT&T and Verizon as the big two.
After Sprint Nextel, there is an assortment of smaller firms like Tracfone and MetroPCS, and regional players in each marketplace like Cellular South and U.S. Cellular. These are good players, and they are an important part of the mix, but they are not large enough to matter in this debate. And this merger would make them smaller than ever in comparison.
So, when AT&T and T-Mobile point to a very robust and rapidly growing wireless marketplace in order to be approved to merge, we should realize that this may be stretching the truth quite a bit. If this merger takes place, AT&T and Verizon will control what — 89 percent of the market?
At the end of the day, this deal may happen. If it does, there will be good and bad parts. We should just make sure we don’t just quickly and blindly approve it. This is an opportunity to shape the future of the wireless business going forward. It is not only an opportunity, but also an obligation. If this merger goes through, it will impact everyone — customers, investors, workers and competitors — for many years to come.
For my Pick of the Week topic, I’ll offer some thoughts about Lightsquared, which may play a role in giving wireless carriers more data capacity. It does not offer service yet, and it continues to send out mixed signals, but it continues to build.
Lightsquared CEO Sanjiv Ahuja gave a keynote at last week’s CTIA show and was on CNBC describing what it is trying to do, and it sounds impressive. It is facing some stiff technical problems that it needs to overcome, but it also has a great idea.
The industry players need more wireless data capacity, and Lightsquared would provide it.
Phil Falcone is a single man with a big dream, and he is working to make this a reality. He sees a growing wireless opportunity and wants to be a part of it.
Lightsquared is striking deals with industry players. For example, last week it announced deals with Best Buy and Leap Wireless, and this week, there have been reports of interest from cable television companies like Time Warner and CableVision.
Nothing is certain yet, but Lightsquared is inching its way closer to becoming a real competitor. We’ll have to keep our eyes on it and hope for the best.