It appears as if AT&T and T-Mobile finally gave up on their proposed merger today based on this announcement. It has been a long time coming but it now appears to be over. I believe this is a great win for the American consumer but also AT&T shareholders.
I had my doubts about whether this deal would pass government scrutiny when it was announced but what really caught my eye was how AT&T and T-Mobile were selling the deal. They claimed that they were doing this deal to ensure that AT&T and T-Mobile would have sufficient spectrum to roll-out 4G services. To do this, AT&T would purchase T-Mobile for $39B. Thirty nine billion dollars! I felt like there was more to it than that because there were much better ways of accomplishing the stated goal of securing spectrum but for a fraction of the cost.
If this deal actually was about securing spectrum for their combined customers, this would have been one of the most expensive and inefficient deals in history. If we take a look at what other alternatives were available to AT&T to accomplish the stated goal in a similar or better way, there are at least two options that come to mind.
First of all, AT&T and T-Mobile could have formed a wireless network joint venture. This has been rumoured to be plan-B. This is a very common way of operating for operators in Europe and elsewhere. Basically all network assets (and sometimes spectrum assets) are put in a jointly owned corporation which then operates, merges and optimizes the networks based on the input from the owners. The two operators then continue to operate under separate brands in every other aspect, only the network infrastructure is the same. This would actually save the two operators tremendous amounts of money and achieve the same stated goal as the merger.
Second, AT&T could have decided to strike a deal with, or even purchase, Clearwire. This would probably have come at a fraction of the $39B merger price. Clearwire is one of the premier spectrum holders of 4G spectrum in the US and that spectrum would complement AT&Ts existing 700Mhz LTE spectrum very well.
This deal was a bum deal not only for consumers but also AT&T and T-Mobile customers as well as AT&T shareholders. Why pay $39B for something that is only worth $3-6B? Yes, AT&T is now taking a $4B charge to pay for the break-up fee and will also offer roaming to T-Mobile but this is still better than paying $39B, but in the long run I don’t think the AT&T shareholders will be too happy with current management because of this adventure. Heads have rolled for less.
I have doubted the official reasons for this deal since it was presented and I don’t think it was ever about the spectrum. I think AT&T was trying to grow the customer base through an acquisition instead of organic growth in a competitive market and used their need for spectrum as an excuse to get this deal through.
I had my doubts about whether this deal would pass government scrutiny when it was announced but what really caught my eye was how AT&T and T-Mobile were selling the deal. They claimed that they were doing this deal to ensure that AT&T and T-Mobile would have sufficient spectrum to roll-out 4G services. To do this, AT&T would purchase T-Mobile for $39B. Thirty nine billion dollars! I felt like there was more to it than that because there were much better ways of accomplishing the stated goal of securing spectrum but for a fraction of the cost.
If this deal actually was about securing spectrum for their combined customers, this would have been one of the most expensive and inefficient deals in history. If we take a look at what other alternatives were available to AT&T to accomplish the stated goal in a similar or better way, there are at least two options that come to mind.
First of all, AT&T and T-Mobile could have formed a wireless network joint venture. This has been rumoured to be plan-B. This is a very common way of operating for operators in Europe and elsewhere. Basically all network assets (and sometimes spectrum assets) are put in a jointly owned corporation which then operates, merges and optimizes the networks based on the input from the owners. The two operators then continue to operate under separate brands in every other aspect, only the network infrastructure is the same. This would actually save the two operators tremendous amounts of money and achieve the same stated goal as the merger.
Second, AT&T could have decided to strike a deal with, or even purchase, Clearwire. This would probably have come at a fraction of the $39B merger price. Clearwire is one of the premier spectrum holders of 4G spectrum in the US and that spectrum would complement AT&Ts existing 700Mhz LTE spectrum very well.
This deal was a bum deal not only for consumers but also AT&T and T-Mobile customers as well as AT&T shareholders. Why pay $39B for something that is only worth $3-6B? Yes, AT&T is now taking a $4B charge to pay for the break-up fee and will also offer roaming to T-Mobile but this is still better than paying $39B, but in the long run I don’t think the AT&T shareholders will be too happy with current management because of this adventure. Heads have rolled for less.
I have doubted the official reasons for this deal since it was presented and I don’t think it was ever about the spectrum. I think AT&T was trying to grow the customer base through an acquisition instead of organic growth in a competitive market and used their need for spectrum as an excuse to get this deal through.
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