All may not be well if the AT&T/T-Mobile deal falls through
When we learned yesterday that AT&T’s bid to purchase T-Mobile would likely fall through, almost anyone with a smarthpone probably uttered a sigh of relief. If AT&T is allowed to buy T-Mobile, it will be a huge blow to customers, especially those who need to use GSM devices for one reason or another.
If the AT&T's purchase is in fact blocked, the company will have to pay out $4 billion dollars, three in cash and one in spectrum, to T-Mobile. This was, as usual, detailed in the purchase contract. That is quite a bit of money, and it has the potential to change the current wireless market pretty drastically.
The amount may not be too much for AT&T to pay, but for T-Mobile a $4 billion payout is huge, considering that the company as a whole is only valued at about $15-20 billion. Just imagine what T-Mobile could do with that kind of money. They would be able to buy new spectrum, roll out substantially more 4G, and perhaps even get stockholders interested in the company again.In short, it could provide the growth spurt they desperately need.
This would, of course, be all well and good for T-Mobile. While their parent company, Deutsche Telekom, is eager to sell them, the US portion of the company has still been fighting hard to keep its name alive. Most recently, it has been running adds that tout the carrier's Android phones, claiming they are more than a match for the iPhone 4S. This is, of course, to combat the fact that they do not carry the important device, but it is still great to see them fighting as hard as they can.
Where the problem comes in is when T-Mobile grows, what happens to all the even smaller competition? We have been worrying about the giant that is AT&T gobbling up the smallest of the big four carriers, but T-Mobile could potentially dominate the low cost market and knock carriers like MetroPCS, Cricket Wirelss, US Cellular, and other regional players out of the game.
Even if you don't use any of these carriers, without them everyone will be stuck using one of the "big four," and they will no longer have any kind of competition in the budget space. You may be thinking that things like Virgin Mobile and Boost Mobile will still be around, but keep in mind that they simply rebrand the larger carriers networks and can be cut off almost anytime. Admittedly, the independent networks of MetroPCS and Cricket are small and have few users, but having them around as an option is important for keeping the big guys on their toes.
Another thing that would be lost if the deal falls through is the promised spectrum and asset sales that AT&T promised to other carriers in the market. In order to make the deal look better and curb thoughts of monopoly, AT&T offered to sell and even give wireless spectrum to smaller carriers like MetroPCS. This alone is not reason to approve the deal, but it is a small bit of good that would have come from a completed deal.
Despite these arguments, I am in no way in favor of the proposed merger. As it stands, combining the only two GSM carriers in the US would be simply terrible for consumers. In fact, the growth of T-Mobile would likely enhance competition among the big four.
Still, we need to realize that whether it is approved or not, the deal will have negative impacts. They may be small, but it is still unfortunate that we will be left with a potentially bad situation regardless of the outcome of the purchase.
