AT&T (NYSE:T) is shaking up the telecommunications space with a huge offensive move to buy T-Mobile. Although AT&T put together a slick presentation explaining all the deal’s benefits, we see two big ways consumers will win and two big ways consumers will lose.
AT&T Deal Benefits to Consumers
1. You’ll be able to hear me now. AT&T’s network coverage will get better. In the longer term — we’re taking more than 2 years out — this will add capacity to AT&T’s networks, up to 30% in some cities. AT&T is at a real disadvantage relative to Verizon today when it comes to sheer network coverage and capacity and this deal is all about scale and capacity for the future. When the networks are combined – which will probably happen as AT&T rolls out its “4G” LTE network starting this year but mostly in coming years, the additional spectrum and the additional cell tower infrastructure will go a long way towards helping alleviate this problem. And AT&T has pledged to spend $8 billion more on network infrastructure than it otherwise would have, expanding its network to underserved areas, eventually covering 95% of the U.S. — that’s 15% more than it planned to.
A corollary to this is that cell towers that aren’t needed or are redundant will be sold off by AT&T, so people who are opposed to new cell tower construction may see a break in the action as existing towers are repurposed by other carriers.
All of this won’t be overnight simply because a) the deal is going to take more than a year to close, and b) AT&T and T-Mobile are not using the same frequencies – as today’s phones were not built to work on both networks.
2. You’ve won a new … phone! All this network change will come at a price — you’re going to need a new phone. While only AT&T today knows how it will integrate the two networks, the core network incompatibilities will mean some shifting of voice and data around the networks, and in the next few years, you’re likely looking at a new phone. That’s not too much an onerous situation as customers are routinely swapping out phones anyway. And in the near term, T-Mobile customers get access to the iPhone — for those who didn’t want to switch but did want an iPhone, well that’s on the menu now. We should note the downside to this is that the iPhone will be offered at AT&T prices and with AT&T plans (see #2 below).
AT&T Deal Costs to Consumers
1. The unique parts of T-Mobile will go away. AT&T has always tended to consume its acquisitions and not leave a lot of recognizable parts behind, and we suspect that this will be the case here as well. T-Mobile has (not always successfully) launched a number of innovative services, most notably a voice over Wi-Fi plan that allowed users to make calls from home or the office without burning up any of their mobile plan minutes. A more recent example is “unlocked” Android phones — where AT&T and Verizon tend to keep pretty tight control over what and how you can add apps and otherwise modify the software of your Android phone, T-Mobile has been the carrier most likely to sell consumers unlocked Android phones. AT&T’s network does not allow “non-market” applications on its Android-based wares. So expect more plain vanilla and less sexy offerings.
2. Prices (for T-Mobile customers) will go up. T-Mobile has approached the market (much as Sprint has done) from the “feisty underdog” role, offering lower prices or more “stuff” per dollar than the bigger competitors (more stuff meaning more Gigabytes per month in the same price data plan, etc.). There is, in our opinion, zero probability that this will remain the case. So T-Mobile users can expect a rate increase when their contracted plans expire, if not sooner, to bring the customer base in line with AT&T’s profit expectations.
Authors Danny Briere and Pat Hurley are telecommunications experts at TeleChoice, Inc. Mr. Briere has written more than 1,000 articles and has authored or edited a dozen books on the subject. He is often quoted in leading publications and can be seen on major TV networks providing analysis on the latest communications news and breakthroughs. Mr. Hurley specializes in emerging telecommunications technologies. Danny and Pat are co-authors of Smart Homes For Dummies, Home Theater For Dummies and HDTV For Dummies. Danny and Pat also co-wrote Wireless Home Networking For Dummies, 3rd Edition.