AT&T’s T-Mobile Buyout a Washout?

Speculation over the implications of AT&T’s buyout of T-Mobile has been dinner table conversation among the mobile industry’s movers and shakers for a few months now. But has the deal completely fallen through? Eddie Ringle reports:

Late last night, AT&T announced that it had withdrawn its T-Mobile takeover applications to the FCC. While both AT&T and Deutsche Telekom (T-Mobile USA’s parent company) have stated that they “[continue] to pursue the sale of Deutsche Telekom’s US wireless assets to AT&T,” AT&T has prepared a $4 billion loss in its accounting books when the deal falls through completely.

AT&T's T-Mobile Buyout a Washout?The deal is hanging on by a thread, with AT&T dropping any dealings with the FCC at the moment in order to concentrate its efforts on gaining the Department of Justice’s approval. However, an FCC official stated Thursday that “the record clearly shows that — in no uncertain terms — this merger would result in a massive loss of US jobs and investment.” With strong disapproval from the FCC, hope for AT&T to pull through with this deal looks very slim indeed.

So, what happens next? Deutsche Telekom clearly wants out of the US market, so it will most likely still pursue a buyer. Word from the rumor mill hints that Vodafone — which currently holds a significant interest in Verizon — is interested in making an offer. In fact, Vodafone had an offer on the table months ago, before AT&T entered with its massively overpriced $39 billion proposal. In reality, we could see any number of carriers making a deal to buy T-Mobile, save from the other big four carriers of course, as the FCC has made it clear that having only three major carriers dominating the US market would hurt the consumer big time.

Another possibility is that Deutsche Telekom will simply sell off its T-Mobile assets piece by piece until T-Mobile ceases to exist. I, for one, hardly see this as an outcome, as T-Mobile is still a profitable company. Deutsche Telekom is not losing anything by holding on to T-Mobile, so it makes sense that it would rather pursue a buyout instead.

What is for certain, though, is that Deutsche Telekom will be receiving a cool $4 billion from AT&T when the deal falls through. $3 billion in cash and $1 billion in spectrum access to be more precise. Most people jumped the gun and assumed that the assets would be spent towards improving T-Mobile’s network. I wouldn’t put it past Deutsche Telekom to pocket the money or spend it improving things over in its home market, however, especially considering the stunts it’s been pulling to make T-Mobile look like it is in bad shape (laying off highly valued CSRs, for example).

Following this news, a few rumors popped up in regards to T-Mobile receiving the iPhone (again). However, this time the logic seems to make some sort of sense. With T-Mobile in danger of being acquired by AT&T, it would be silly for Apple to invest heavily in providing phones compatible with T-Mobile’s network. Of course, now that the deal is virtually dead, perhaps we will see T-Mobile sporting the iPhone sometime soon. There is no other reason Apple has for not signing a deal with T-Mobile, especially after providing iPhones to C Spire Wireless, a carrier with a significantly smaller subscriber base (T-Mobile’s 33+ million vs. C Spire’s 900,000).

I don’t doubt we’ll see T-Mobile seriously rebound in some shape or form. They are seeing a renewed vigor in the form of new prepaid customers, which attributed to T-Mobile’s slight increase in revenue last quarter. We should also consider the vast number of customers who dropped T-Mobile for Verizon or Sprint in fear of the merger who will most likely be returning. I personally expect the bad air surrounding T-Mobile (mostly due to AT&T and Deutsche Telekom’s meddling) to dissipate quickly. Soon, it can be hoped, T-Mobile will go back to being the carrier we all know and love.

Despite what happens next though, the fact that AT&T is essentially out of the running to buy T-Mobile is great news for everyone. T-Mobile customers (including me) don’t have to worry about losing our amazing devices due to incompatibilities with AT&T’s network. Sprint doesn’t have to worry about being gobbled up by Verizon. Most important, consumers get a guarantee that choice will remain in the wireless market.

Article Written by

Guest Blogger is from all sorts of different times and places. Guest Blogger is usually less mysterious than James Bond, but often more mysterious than Austin Powers. Guest Blogger has a knowledge base that is as vast as space, and as timeless as infinity. Guest Blogger is sometimes me, and Guest Blogger is sometimes you.

  • C. Lauretano

    Here’s a reason for Apple not to provide an iPhone on T-Mobile’s network: it would need a different radio. Right now the iPhone is totally unified, with GSM/WCDMA/HSPA+/CDMA/etc to work on the three largest carriers. T-Mobile’s “4G” (HSPA+) network, though similar to that of AT&T, runs on different frequencies and would require different hardware, thus doubling the number of iPhone 4S models Apple would need to produce.

    • Eddie Ringle

      Yes, that’s the exact reason I stated. Apple wouldn’t want to produce phones for T-Mobile’s network if AT&T was just going to re-purpose the frequencies. In this case however, the Qualcomm chipset (MDM6610) in use on the 4S supports T-Mobile’s AWS frequency, all that is needed is a software change.

  • Teddc

    As a T-Mobile Employee, I have been watching this merger attempt closely.  My information held that T-Mobile withdrew the FCC application for turning over their license to AT&T, not the other way around.  Either way, it certainly shows a lack of confidence that the deal will go through and that makes me happy.  I have worked for AT&T and T-Mobile is by far a better company to work for.  I hope it does fail so I can continue to wear the magenta hat.  Not to mention we get our retention bonus even if the deal falls through.

  • Teddc

    One other thing has been circulating around the grape vine at T-Mobile.  That being that Google, the makers of the Android operating system which has recently surpassed the iPhone in sales, may put in a bid.  While this is just speculation at the moment, I would not mind if Google decided to get more involved in the wireless industry and if they do so, I think it will create a huge potential for growth in the industry, both for the consumer in the way of innovative new devices and systems, as well as the industry as a whole in the increased revenue.  Google has always been known to embrace the open systems and this gives them a huge advantage over Apple, who tends to tighten their leash on their systems more and more, not willing to share anything.

    • Eddie Ringle

      As much as I’d like to see Google and T-Mobile team up, I doubt the FCC would allow it to happen. With Google already bidding on Motorola Mobility, the idea of them operating their own network as well would see some fierce opposition.