AT&T Drops T-Mobile USA Deal

http://online.wsj.com/article/SB10001424052970204791104577108900032431264.html?mod=WSJ_hp_LEFTTopStories

by marklabedz • 15 years ago

114 74 15 years ago

online.wsj.com

I made a $500 bet with options that this deal wouldn't go through. I was right about the outcome but unfortunately I was wrong about the timing.

http://news.ycombinator.com/item?id=2351157

Xuzz3• 15 years ago

I asked this on Twitter, but perhaps I'll get better responses here:

T-mobile is dying; it has no plans for the future. They don't have the iPhone (and are unlikely to get it, due to working on a different set of 3G frequencies). They don't have any plans for LTE deployment, unlike AT&T, Verizon, and Sprint. Their parent company wants to get rid of them.

To me, this just seems like the government has done very little here for consumers, they will still likely end up with only 2-3 carriers. Why is it better for consumers if T-mobile just dies out rather than is bought to improve AT&T? (Also, many people think AT&T has a worse network than Verizon. Wouldn't this deal have, then, increased competition?)

tptacek• 15 years ago

T-mobile's US assets are worth a significant amount, so they're unlikely to simply shutter and go away. Think about this regulatory hurdle not as dooming T-mobile, so much as sending their assets to some company other than AT&T.

I wasn't upset at all about the merger (quite the contrary), but I don't think the outcome is as bad as you say it is.

jerrya6• 15 years ago

Other carriers, Leap Wireless, Cricket, ... seem to want Tmo's assets, and ... AT&T had offered to sell it to them. http://www.mobileburn.com/17966/news/att-reportedly-having-d...

But if AT&T doesn't buy Tmo, one of these might merge instead with Tmo or buy those assets directly.

At other times, there has been speculation (or even work done) on a Sprint / Tmo merger which would bring two weak players together but also allow for more direct competition between the GSM and CDMA world with an LTE path going forward.

jerrya6• 15 years ago

Actually in the past 4 days or so, there have been reports that T-Mobile is "refarming" some of its towers and there is now 3G support for iPhones in some parts of the northwest.

http://www.tmonews.com/2011/12/unlocked-iphone-spotted-runni...

Also the iPhone 4s is a quad-GSM phone with HSPA+ support and so could conceivably, if I just mix and match acronyms, get 14M to 42M down on Tmo's network.

I am not sure of the magic behind this, but I believe it's the same as bringing over a quad band GSM Galaxy Nexus from Canada/Europe and putting it on Tmo's network, with the exception that the Nexus is carrier unlocked and the iPhone 4s is not. (I believe.)

cjdavis2• 15 years ago

You can actually buy the iPhone 4s unlocked straight from the Apple website. I just did last week as an xmas gift for my dad, with the intention of trying it out with his current account on Cincinnati Bell Wireless.

I believe they use the same frequencies as T-Mobile.

bryanlarsen• 15 years ago

galaxy nexus is penta-band, which is why it works on tmo.

toomuchtodo• 15 years ago

Reducing the number of carriers reduces the amount of competition. Improving the quality of AT&Ts network has nothing to do with increasing competition amongst carriers.

nextparadigms2• 15 years ago

I think a lot of people said the same thing when the banks started merging, too. And look where that got the US economy because of "too big too fail banks".

I would've preferred capitalism followed its natural course, and let one or two smaller banks die, than to get in a situation where a handful of huge banks can wipe out the entire economy if they are allowed to fail.

The thing about capitalism is that it needs to let parts of it fail, so it can thrive overall and in the long term.

Also, I don't think T-mobile will disappear. Worst case scenario it will be bought by an international carrier, but at a smaller price.

neilc• 15 years ago

I would've preferred capitalism followed its natural course, and let one or two smaller banks die, than to get in a situation where a handful of huge banks can wipe out the entire economy if they are allowed to fail.

I'm curious what makes you think one outcome is the "natural course" of capitalism, while the other is not.

maratd• 15 years ago

There is really no such thing as too big to fail. In the case of the "financial crisis", the few failing banks should have been allowed to fail. Some were and the sky did not fall. There were plenty of sound ones who were not involved in the nonsense. The same can be said for the automotive industry. The bailouts were nothing more than a transfer of wealth orchestrated by the government. From the middle class and the wealthy, to the incompetent clowns in the government and private industry who created the mess in the first place.

There is absolutely nothing worse for the people at large than the collusion between government and the private enterprise. It is very simply the definition of corruption. Read the Wealth of Nations by Adam Smith for more love.

As for AT&T and T-Mobile, the government created the problem in the first place. By selling spectrum, they necessitate the existence of large massive companies in the space. They're the only ones who can afford the spectrum. If the government instead chose to keep the spectrum open, like say the way they do for WiFi, you would literally be able to start your own cellphone company in your garage ... and there would naturally be quite a bit more players in the space. They would still need to cooperate to make things work, but having more choices is the goal here.

If you look hard enough, behind every market problem and failure, you'll find a fat bureaucrat and fat "business man" working together to keep each other fat and the rest of us miserable.

brudgers• 15 years ago

T-mobile, of which I am a customer, offers something that none of the large US carriers offer - a monthly discount if you own your own phone rather than purchasing a subsidized phone (of course it is not the easiest thing to find on their website).

simoncion4• 15 years ago

A quick search reveals news that indicates that one is required to enter into a two-year contract to receive this discounted rate.

untog• 15 years ago

T-Mobile is still a very valuable target for a buyout- just not from one of the existing cellphone companies.

I would not be at all surprised if someone like Time Warner Cable (or Dish, as the TechCrunch article mentions) took an interest. Verizon can offer a "quad-play" internet/home phone/cellphone/TV plan, and I suspect their competition would love to do the same.

Also, don't forget that T-Mobile just earned $4bn from AT&T. That can do them a lot of favours.

ErikRogneby• 15 years ago

DT the parent company gets the $4B, not T-mobile USA. (which is actually $3B + spectrum)

kin• 15 years ago

As a T-Mobile customer, I follow iPhone news pretty closely and there's been so many reports of T-Mo reps claiming to get the iPhone. I mean, they already have unlocked ones running under them at 2G speeds. But, they're also upgrading to HSPA+ 42 Mbps (instead of LTE) and in the process supposedly changing the bands to iPhone 3G compatible.

Of course, this doesn't change that they are dying. They've seen positive trends from their new value plans and hopefully upcoming Droid + Ice Cream sandwich launches lets them catch up.

Zhenya• 15 years ago

T-Mobile will never have Droid phones. Droid is a marketing brand that is used by Verizon to sell android phones.

On the other hand they were the first Network in the US to carry Android phones.

http://en.wikipedia.org/wiki/Android_(operating_system)

smackfu• 15 years ago

You are predicting the future as a starting point for your argument. But you are basing that on assumption that may not be true in the future: that the iPhone will continue to be important, and that LTE will be a selling point for customers.

nantes• 15 years ago

I heard from a T-Mobile engineer, back when this whole thing started, that it didn't significantly change their network engineering plans for the next couple of years. Indeed, they were planning on expanding regardless. Again, just what I heard.

eande• 15 years ago

What makes you think that one of the biggest telecom conglomerate with backing of the German government will disappear?

I think it is good that this deal did not go through, good for the consumers. Because T-Mobile as well as AT&T have to stay creative to keep customers happy and prices down. In general I think there is to much concentration of power into single large cooperations anyway.

theoj2• 15 years ago

Some big assumptions in this post:

1. Assumption #1: T-mobile "has no plans for the future."

You can't possibly know that. If anything, the negotiated spectrum transfer and payout on deal failure is a small indication that they do have some plans for the future.

2. Assumption #2: Any carrier without the iPhone is doomed to failure.

Metro PCS does not offer the iPhone. I don't think they are going away anytime soon.

3. Assumption #3: The government needs to plan for cellular market consolidation in order to benefit the consumers.

Actually, cellular market consolidation is not good for the consumers. Consumers benefit the most when there's more competition. Having more carriers leads to more competition and gives consumers lower prices and better service -- it's simple economics.

Xuzz3• 15 years ago

My point here is that T-mobile, as it currently is, just isn't competition for AT&T and Verizon anyway.

1. The only thin I can find at all on Google related to T-mobile building is this post, suggesting they need a partner to start working on LTE in — get this — 2015: http://www.slashgear.com/t-mobile-lte-plans-suggest-spectrum...

2. It's certainly helpful; I don't believe this alone would doom a carrier, but without other benefits (Metro PCS, your example, has very cheap pre-paid plans and is really a different service than AT&T, Verizon, or T-mobile) this does hurt them. Just look at the millions of customers that switched to AT&T from 2007 to 2010 before Verizon got the iPhone.

3. I didn't say and, in fact, do not believe that "consolidation" will necessarily benefit customers. My only belief here is that that the government did here — keep a independent — is not useful because T-mobile is simply not competition. If T-mobile isn't actually competition in the future for AT&T or Verizon, how does it help for it to exist or be broken up among other companies?

(I do, however, believe it is possible (definitely not guaranteed, but possible!) that this move, in fact, could help consumers: AT&T currently has the generally accepted worst coverage, and so if they improved that by acquiring T-mobile, Verizon now would have both a slower network and a worse telephone network, and would need to improve to compete with AT&T's faster speeds and now-better coverage.)

mdasen3• 15 years ago

To answer your question:

T-Mobile has a tiny bit more spectrum than Sprint and it's all standard (PCS/AWS) spectrum. T-Mobile has a decently standard GSM/UMTS stack. Sprint is running two non-integrated networks.

On a per-customer basis, T-Mobile isn't so bad on spectrum. 33.7M customers with 50MHz of spectrum. That's actually a better ratio than any other carrier. For comparison

    * T-Mobile: 1.48MHz/million customers
    * Sprint: 0.92MHz/million customers (excluding 100MHz+ via Clearwire)
    * AT&T: 0.93MHz/million customers (including pending 6MHz gain from Qualcomm)
    * Verizon: 0.82MHz/million customers*

* The Verizon numbers exclude substantial purchases recently announced which will probably increase Verizon's spectrum depth by nearly a third.

So, T-Mobile isn't in a terrible spectrum position and the spectrum AT&T has to give them as part of the break-up will only help that. Likewise, $3B is a lot of money that could go toward an LTE rollout.

In terms of LTE, Sprint didn't have an LTE plan until mid-October of this year and doesn't expect to have any LTE devices until the third quarter of 2012. If T-Mobile put together an LTE plan today, they wouldn't be behind the times. I mean, they'd be behind Verizon and AT&T, but they could roll out as fast as Sprint (which just raised $4B for its LTE rollout - barely more than the $3B in cash that T-Mobile is getting as a breakup fee). Plus, LTE in America is a bit ahead of the curve. Mostly that's because carriers in other countries can stretch HSPA+ (as T-Mobile is doing) to provide much higher speeds than 3G.*

So, T-Mobile does have the ability to move forward if DT wants to. It has the spectrum, it has $3B in new cash, and it's profitable (which Sprint isn't). I think DT wants to see T-Mobile a bit more successful if it is to stay on in the US, but it is profitable. If T-Mobile can forge a joint venture with Dish Networks (which is interested) it would gain 40MHz of unused spectrum from Dish and might have a partner who would promote the service to its customers. We'll see. I'm definitely not saying you're wrong. T-Mobile needs a bit of energy and momentum to start gaining customers again. However, I think T-Mobile has the assets needed to keep going.

The one area where I think you're spot on is in terms of competition with Verizon. When AT&T Wireless and Cingular merged, it increased competition. Verizon had been allowed to merge together greater assets than its competitors previously. Allowing AT&T Wireless and Cingular to merge meant that there was a real, nationwide competitor to Verizon with low-frequency spectrum that provided good coverage. Right now, AT&T and Verizon have decently similar assets (although the Alltel merger gave Verizon a slight edge). AT&T has a greater number of data customers which puts a bit of a strain on their network, but they should be able to manage it now-a-days (and the data shows that AT&T has a better dropped call/blocked call rate than Sprint, although slightly worse than Verizon's, and significantly faster data speeds). If the FCC allows Verizon to gobble up the licenses from Cox, Comcast, Time Warner, Leap, and others, it will again create an imbalance that will see Verizon having superior assets that make it hard for other carriers.

* Before someone says, "but HSPA+ is offering 3-6Mbps while LTE is offering 20Mbps" I want to explain a bit. HSPA+ is backward compatible with HSPA and UMTS. So, when AT&T upgrades its UMTS network to HSPA+, there are tens of millions of voice and data customers on it. By contrast, the LTE networks we've seen have only had a couple million customers on them. As more customers use it, the spectrum will get more crowded and speeds will likely drop as a result. Likewise, there are many different HSPA+ versions. AT&T is running HSPA+ at 21Mbps while T-Mobile has it up to 42Mbps in some areas. However, even HSPA+ 14.4 has been showing average real-world speeds on the iPhone 4S of 3.2Mbps (http://www.macrumors.com/2011/11/18/nationwide-study-shows-a...). That's on a loaded network using 5MHz channels. The LTE speeds we're seeing are on a near-empty network using 10MHz channels (from launch to the end of the third quarter, Verizon has sold less than 3M LTE devices). None of this is to say that HSPA+ is superior, just that we're seeing LTE showing better numbers than it would under the same load HSPA+ networks are experiencing and that means the gap is actually smaller and explains how overseas carriers are using HSPA+ in the interim to offer customers a better experience without the cost of LTE (and it is a cost to the consumer as well as one can see from the price of HSPA+ devices against the cost of LTE devices).

marklabedz• 15 years ago

How does Sprint's "Network Vision" impact the MHz/million figures? Can we expect to see improvements there? (Excluding challenges due to backhaul off the towers....)

stanleydrew• 15 years ago

It might be a long shot, but I would not be surprised if Google bought T-Mobile. Maybe that's just wishful thinking though.

I, for one, love T-Mobile and would be very very disappointed if they died. They have a 4G network that I'm making use of right now. I can use Android's built-in WiFi hotspot at no additional cost. And they are the only phone company that I know of that discounts plan prices for out-of-contract customers:

http://deals.t-mobile.com/no-contract-plan

r00fus• 15 years ago

Prior to their purchase of Motorola, and I'd have laughed at the idea. Now, it at least seems possible. Does T-Mo have any meaningful wireless patents?

guelo• 15 years ago

I don't know why Deutsche Telekom has decided it doesn't want to invest more money in T-Mobile, but some other foreign wireless operator might be up for it. Carlos Slim's América Móbil has already dipped its toes in the U.S. market with its TracFone subsidiary and might conceivably be interested in T-Mobile for a low enough price.

geuis• 15 years ago

Please, don't submit stories that exist behind pay or subscribe walls.

MichaelApproved2• 15 years ago

I would generally agree with this but, in this case, the headline tells it all.

BadassFractal• 15 years ago

US phone plans are still crap compared to what's available in EU. We pay a lot for little service, and are locked out of using the latest phones on most networks unless we're willing to sign up for ludicrous plans that's really hard to get out of.

I've been happy with Virgin Mobile, I'm not willing to pay more than 35 a month, even though the service might be choppy at best.

pkulak2• 15 years ago

The United States is 1.6 times the area of Europe, but more importantly, Europe has 3 times the population density! It just costs a lot more money over here to cover the same number of people with cell service.

absconditus• 15 years ago

This theory is trotted out every time that there is a discussion about cell phones or broadband in the US. Why do we not have incredible broadband for low prices in cities like Chicago and New York? Why did we not have great cell phone plans when regional plans were still prevalent?

simoncion4• 15 years ago

The population density argument is bunk. Why does ATT provide utter crap for cell service in NYC and SF?

cyrus_• 15 years ago

What if Google bought T-Mobile (or Sprint)? They are certainly interested in the telecom space -- look at their investments in fiber-to-the-home and products like Google Voice. Together with their purchase of Motorola, they would be vertically-integrated too, which would allow them to do all sorts of borderline-creepy things with ads.

Of course this might spook the government, or turn Verizon or AT&T away from Android in retaliation, but its an interesting idea I think.

mdasen3• 15 years ago

Two things:

1. T-Mobile was just offered $39B. I don't think Google wants to spend that kind of money on a wireless carrier. Moreover, Google doesn't have it. If the Motorola Mobility sale goes through, their $42B will dwindle to $30B. Do you want to offer new debt to finance a purchase of the smallest US national carrier?

2. Google hasn't shown itself to create utilities to the consumer. They're testing out the waters with Google Fiber, but that's hit delays. Just because a company is good at one thing doesn't make it good at all things. Google has proven itself to be very good at software and DevOps. However, running a consumer utility like a phone company is a bit of a different beast. One specific example is the ability to pivot. With software (especially web software), Google can change direction pretty quickly and freely. By contrast, a wireless company has to make decisions often years in advance because consumers will have the devices for years. They get locked into supporting certain technologies and frequencies for years before they can migrate and refarm those assets for something new.

It's an interesting idea, but I don't think Google has the desire or the money and we've yet to see Google offering a service that is more like a utility (electric, gas, phone, internet). How Google handles its Google Fiber project, whether they expand it quickly to new cities, whether it's profitable for them, etc. will give us a better indication of whether Google is the kind of company that would do well in this space. It is interesting. It would be awesome to see Google do to wireless what they've done to search, email, etc. However, people have also thought this about Apple. Entering the utility business puts one in the unenviable position of being a company to potentially be hated. Right now, Google plays the "we think bandwidth should be unlimited" person that everyone loves. Judging by wholesale rates from Clearwire and LightSquared, wireless data transmission currently costs (at a wholesale rate) $7-10/GB. That's a bit of a harsh reality that makes you less loved when you try to pass that on to consumers. Maybe Google could do better, but it's far from risk free and the gains might not be worth it.

ConstantineXVI2• 15 years ago

Google buying them would be even worse for competition than AT&T. It'd be a total closed loop: Google OS, Google handsets, Google network, Google services. John Rockefeller could only dream of that sort of integration.

orangecat• 15 years ago

Not if Google agreed to run it purely as a dumb pipe.

NHQ• 15 years ago

The US Government should buy T-Mobile and turn it into a nationwide information super freeway.

AT&T Drops T-Mobile USA Deal

Related Stories