Sunday, March 20, 2011

AT&T buys T-mobile for $39 Billion to create the new top dog in US wireless


On Sunday, Deutsche Telekom agreed to sell its T-Mobile USA property to AT&T to help AT&T create America’s largest mobile phone provider, trumping Verizon Wireless. The deal involves cash and stock and is currently valued at $39 billion.
The move also has larger global implications as Deutsche Telekom establishes a relationship with AT&T that makes it part of its global family of wireless carriers — similar to how Verizon is connected to Vodafone — since Deutsche Telekom gets an executive seat on the AT&T board of directors and becomes a major shareholder in the company.
This move makes a lot more sense than the rumors earlier this month of Sprint buying T-Mobile. Even though those two carrier both needed a shot in the arm to compete with US wireless leaders AT&T and Verizon, the integration of the two companies would have been extremely difficult since both their 3G and 4G wireless networks are completely incompatible.
On the other hand, both AT&T and T-Mobile have networks based on GSM technology. Their 3G networks are based on different frequencies but both companies have been building faster networks based on HSPA+ so we should really look at this as a 4G move. The two companies have been badly trailing Verizon Wireless in 4G now that Verizon has aggressively started rolling out LTE across the US. While HSPA+ isn’t as fast or as robust as LTE, the combined HSPA+ networks of AT&T and T-Mobile will give them a larger footprint than Verizon’s current LTE network.
Of course, integration still takes time - even for compatible networks — and Verizon is planning to roll out LTE to its entire network by the end of 2013. This unexpected AT&T/T-Mobile tie-up could have the effect of accelerating the 4G race in the US. That could make the American wireless networks some of the best on the planet — a reversal of fortune after the US fell behind Europe and Asia in 3G.