In AT&T & T-Mobile Merger, Everybody Loses

397 Comments

The lull of my lazy, rainy weekend was broken by the news that AT&T (s t) plans to acquire T-Mobile USA for a whopping $39 billion in cash and stock. Who wins and who loses in this deal? It’s hard to find winners, apart from AT&T and T-Mobile shareholders. Here is a list of who loses, in my opinion, in this deal:

Consumers. The biggest losers of this deal are going to be the consumers. While AT&T and T-Mobile are going to try to spin it as a good deal to combine wireless spectrum assets, the fact is, T-Mobile USA is now out of the market.

T-Mobile USA has been fairly aggressive in offering cheaper voice and data plans as it has tried to compete with its larger brethren. The competition has kept the prices in the market low enough. This has worked well for U.S. consumers. With the merger of AT&T and T-Mobile, the market is now reduced to three national players: AT&T, Verizon (s vz) and Sprint (s S).  Net-net, U.S. consumers are going to lose.

Phone Handset Makers. Before the merger was announced, the handset makers such as HTC and Motorola (s Mmi) had two major carriers who could buy their GSM-based phones. They just lost any ability to control price and profits on handsets because now there is a single buyer that can dictate what GSM phones come to market. Even with LTE becoming the standard for the 4G world, it would essentially be a market dominated by three buyers (should Sprint go with LTE), which would place handset makers at the mercy of the giants.

Sprint. The nation’s third-largest carrier was in talks to buy T-Mobile according to Bloomberg, but AT&T’s offer has now pushed Sprint to the bottom of the pile in terms of size and potentially spectrum assets if it goes through. If it doesn’t go through, then Sprint now has a price it has to match in order to get its hands on T-Mobile. Plus, Sprint and T-Mobile often stood against AT&T and Verizon on a variety of regulatory issues, so if AT&T succeeds, Sprint will stand alone on special access and other issues.

Network Equipment Suppliers. The carrier consolidation has proved to be a living hell for companies that make infrastructure network equipment. Alcatel-Lucent (s alu), along with Ericsson (s ERIC) and Nokia Siemens (s nok) (s si), are suppliers of gears to both AT&T and T-Mobile USA. With a single customer, they will lost ability to control their own fate and are going to see their profits suffer as a result.

Google. I think the biggest loser in this could be Google (s GOOG). In T-Mobile, it has a great partner for its Android OS-based devices. Now the company will be beholden to two massive phone companies — Verizon and AT&T — who are going to try to hijack Android to serve their own ends.

Don’t be surprised if you see AT&T impose its own will on what apps and service are put on its Android smartphones. I wouldn’t be surprised to see the worst phone company in the U.S. (according to Consumer Reports) tries to create its own app store and force everyone to buy apps through it.

It doesn’t matter how you look at it; this is just bad for wireless innovation, which means bad news for consumers. T-Mobile has been pretty experimental and innovative: It has experimented with newer technologies such as UMA, built its own handsets and has generally been a more consumer-centric company. AT&T, on the other hand, has the innovation of a lead pencil and has the mentality more suited to a monopoly: a position it wants to regain.

397 Comments

iphonedroidberry

FUD, FUD, and more FUD. I expected better from you, Mr. Malik. And your comment, “AT&T, on the other hand, has the innovation of a lead pencil” has no basis in reality. Please go do some research on Bell Labs (now AT&T Labs). Also Cingular/AT&T worked with Apple in developing the iPhone, one of the most innovative mobile devices ever created. And Cingular/AT&T invented visual voicemail. Innovation is what drives AT&T. Much of what people do nowadays on the internet and on cell phones and smartphones is possible because of AT&T Bell Laboratories. http://en.wikipedia.org/wiki/AT%26T_Bell_Labs#Discoveries_and_developments

At&T user

AT&T-Mobile?
hope it works out and they get everything right AT&T should loosen up some
put back unlimited data, open access to third party app on android [as if i cant get around it ;)], and make their plans cheaper if they would… you know be a bit lenient this could actually work for every one
and i really hope it does for their sake cause if it doesn’t that 41 billion lost for at&t which could lead to a possible increase on my bill and thats money i really dont want to spend

xrayangiodoc

I switched from Verizon to T-Mobile last May. I had read Consumer Reports evaluation of T-Mobile’s excellent customer service and have nothing but good things to say about them. While AT&T and Verizon both wanted $30 a month extra for their data plans, T-Mobile provides an unlimited $10 a month plan on my Nokia Nuron. Unlock codes were provided without difficulty so I could put a cheap German SIM card in when we visited Europe and use the phone without difficulty. The lifetime free GPS also worked well in Germany.Perhaps we should start voicing objections to the merger when the FTC solicits public comments.

ML

I LOVE T Mobile – Tm THE BEST customer service out there! & their phones ROCK! oh well, better AT&T than Verizon – BLEKH!!!!!

Greg Maletic

I’m not an AT&T super-fan, but is it totally fair to call AT&T non-innovative? They were the only ones to give Apple the concessions they wanted in order to bring the iPhone to market. If they hadn’t done that, the phone market would be in much sadder shape that it is now.

Fred Campbell

There’s too much U.S.-market focus in this analysis. Handsets and network equipment are a global business. The U.S. market can’t dictate their fate or control prices. The article also spending too much time looking in the rear-view mirror. Data is becoming king, and T-Mobile has no plan for moving to LTE, which means that T-Mobile customers are destined to fall behind in the data race if nothing changes.

don

This will probably fall on deaf ears, but …

lose – opposite of win;
loose – not restrictive, not tight, free, as in “My belt is loose.”

Yacko

I feel for you but I don’t think there is any way back to the way it was. Perhaps it is time to coin “looze”, retire “lose” and hopefully people will leave “loose” alone to be used properly.

davesmall

Apple seeks to provide the best possible user experience. That’s why they’re so successful and so loved by their customers.

AT&T and Verizon and Comcast seek to extract the maximum revenue possible from the consumer. That’s why they’re universally hated by their customers. Bend over and grease up before doing business with them.

T-Mobile offered better pricing, especially with their prepaid plans. I doubt they did it because they wanted to. More likely because it was one way the could fight against the goliaths.

Brian

Winner? Att customers. Winner? T mobile customers.

Google a loser? Hardly. So what if android gets changed up to suit the carrier needs? Let them build their own phone and sell it subsidy free if they’re so worried about it.

Leigh

I think the biggest losers will be t-mobile employees like myself that have an att store right up the road

Corin Choppin

Rather than just say this merger is bad for consumers; it would be great if your article listed who we can mail to voice our concerns about this merger.

Better than complaining is doing something about it.

Peter Mullen

I was going to join t-Mobile shortly and check out the Nexus S (a favorite of Fred Wilson and many others) when my Sprint contract is up in a couple months. Not now. I don’t want to go anywhere near AT&T with their suckass network and customer service. Say good-bye to real consumer choice.

Required field

The Feds better not allow this. Just got back from India where cell phone minutes cost two cents. There are at least ten cell phone companies in India. Competition does matter and we need more not fewer companies. FWIW I’m an AT&T user.

gizmotronic

How, exactly, can AT&T regain a monopoly it never had? If you had been paying attention, you would know that the company currently using this name is not the same company that was broken up over 25 years ago. Coupled with some bad facts (e.g. GSM phones have a worldwide market, not one limited to the United States), one has to wonder if the entire argument isn’t simply sour grapes.

V

Tmobile already has the best prices for minutes and plans in the market with innovative phones to choose from. I think this is a really bad deal, because ATT already has the worst customer service in the nation and I dont think it would get any better. At least with tmobile the customer service was awesome. I think Att is just looking for control of the market not the innovativeness of catering to the public. I do believe everything would be charged for. An even better merger would be another company that could use Tmobile’s innovative directions.

Stuart

I remember when Ma Bell owned the phones and every month they would charge you a fee for renting the phone in your house. I hope at the least the government will require them to unlock all their phones or the regional GSM carriers will be crushed due to exclusivity. Perhaps they should even decouple selling phones apart from service so you buy a service plan and you buy a phone independently.

patrick

This sounds like a raw deal for consumers. As an AT&T customer I had lousy service both on mobile (particularly bad coverage in SF and NYC) and on my broadband internet service at home. On the mobile front, I was able to change to Sprint which has been pretty good. However, at home it’s been a disaster. They’ve had to replace my router twice and even when they installed U-verse we eventually switched back to Direct TV. So, overall I’d have to agree that for consumers this probably isn’t good news.

The one thing Om leaves out: one winner for sure are the investment bankers. As usual, they’ll make a ton of money for brokering a deal that is both bad for consumers and ultimately bad for employees at both companies. There are reams of data showing that 90% of mergers generally fail and my guess is this one will be no different. Seems like all the bad old habits and excess of Wall Street bankers are alive and well with this ridiculous merger.

The best thing the FCC could do would be to kill this deal fast

SSteve

You forgot one class of people on the losing end: current employees. Let’s translate this paragraph to real-world language:

“The T-Mobile deal may give AT&T a way to boost earnings because of the money the companies would save by combining their operations. The companies’ estimate that they could have $40 billion in synergies is a realistic assessment, said Jonathan Chaplin, an analyst with Credit Suisse Group AG.”

Translation: “An army of employees are going to be served their walking papers.”

Derek Bolander

Rethink possible, everybody. Rethink possible.

Now more customers can experience the wonder of simultaneous dropped calls and data.

Frank

Wow! This is fantastic news. Anything that helps to drive a bullet in the heart of the kludged together experiment that is Android is great news indeed. I think Apple is a big winner here. They just expanded their customer base. If it’s good or Apple, it’s bad for Google. Long live AT&T/TM.

dan85031

the little recognized fact is at&t has horrific customer service they dont help customers this is a fact look at consumer reports or cnet even the bbb their just bad and t-mobile customers suffer through some of the best customer service available. how long do you think they will stay arround.

I called 611 tonight to find my contract date and the rep said they’ve been flooded with calls asking when they need to switch because they wont go to at&t. i have a big feeling sprint and verizon are very happy they are about to get a lot of new contracts at&t was counting on to pay for this fiasco. when my contract is up in august sprint here i come after 7 years i am very sad to go.

P.S. did everyone forget the whole your phone isn’t working because your holding it wrong nightmare. lol

Craig

Ok, I have to weigh in here. I am an AT&T customer. Before that, I was a Cellular One customer. Guess what? I survived the buyout of Cellular One in 2007 and couldn’t be happier with my AT&T service and phone. Just like T-Mo, Cell One wasn’t viable long term. I think everyone wins here. Don’t believe me? Just take a look at the LTE maps AT&T has made public. It’s a huge win for rural customers like myself – plus now T-Mo customers will get LTE. Who really loosed here? Sprint? WHO CARES!!

Jack C

I completely agree Om.

I’m a T-Mobile customer and while I’m not in love with the carrier, I enjoy many freedoms that AT&T doesn’t offer (e.g., @Home line for $10/mo, free tethering on NS, off-contract options, UMA, etc.). Outside of the pre-paid carrier market, T-Mobile is one of the only carriers offering genuinely consumer-friendly options. If anything, AT&T is trending in the opposite direction (e.g., tethering, femtocells, etc.), in terms of consumer friendly innovation.

U.S. carriers already have too much power, consolidation is not a good direction for consumers. Hopefully, regulators will want to slow down big consolidation a bit after Comcast, and will shut this one down.

Ike

Wasn’t AT&T a mega company that was a monopoly and was for that reason split into fraction companies. Why are the regulatory authorities allowing AT&T to merge with and buy itself into a monopoly? To be split again and the process repeats itself again …?

gizmotronic

No. Same name, different company. SBC acquired the rights to the name when they bought what was left of the old AT&T in 2005.

Even if that were the case, any talk of monopoly is ridiculous, since it ignores the fact that there are two other carriers (besides AT&T) that are larger than T-Mobile.

FalKirk

Interesting point. The original AT&T was a government sanctioned monopoly. They were sued and, in a ground breaking court case, they were order to divest themselves of their phone services. At the end of the day, there was a company called AT&T plus several regional “Baby Bells”.

It didn’t take long before the “Baby Bells’ stared acquiring each other. Verizon was one of the original Baby Bells. Another Baby Bell actually purchased the original AT&T and renamed themselves AT&T. I’m not in favor of government sanctioned monopolies, but clearly the courts did not understand economics. It’s taken a while, but one-by-one, the pieces of the phone industry are re-consolidating. In an age where we want service to be universal and ubiquitous, small and regional carriers make little or no sense.

Natalie

This is bad, very bad. As a loyal customer of T-Mobile since it was Aerial in ’97 and the wife of an ATT employee, this is bad. To quote one of the facebook comments, “which Android phone should I get on Verizon?”

smayer

Have any of you actually read anything else besides this? Go to tmobiles website and read the new FAQ they just posted…tmobile will stay INDEPENDANT….all this does is offer better coverage for both networks…and besides this deal will take over a year to complete…tmobile employees are safe for now

ryan

They don’t say they will stay independent. They say in a deliberately confusing way that they are independent until the merger happens.

liz

Thunder bolt or Droid x just switched from t mo about 5days ago and I love it nothing against tmo I had them for about 3yrs last phone was the g2 great phone by the way there plans are not tht much more expensive I’m paying the same as I was with tmo glad I got out just in time I didn’t even know about the merg p.s iPhone six its way over rated

Welshire

could be a win for Sprint

after ATT jacks up Tmo customers prices to standard ATT rates then many may leave to hop on Sprint.

D!

My only bone to pick with this article has to do with the idea that Google is going to be pushed around by the networks. Google wouldn’t let themselves be pushed around by the Chinese or US governments. I doubt AT&T is going to fare any better.

patrick

really? then maybe you can explain why AT&T users can’t download non-Android Market apps? Or why the carriers are able to extort 20% revenue share from android apps from Market? or why Google has been unable to provide carrier billing to consumers on Market beyond AT&T and T-mobile?

mcrochip

My understanding is that on VZW, if you install unauthorized Android software it will literally fry your phone… Moto Droid (2?) with the fuse chip in it.

dave

“Google. I think the biggest loser in this could be Google. In T-Mobile, it has a great partner for its Android OS-based devices. Now the company will be beholden to two massive phone companies — Verizon and AT&T — who are going to try to hijack Android to serve their own ends.”

Um, they both are already doing this, for example, with crapware that can’t be uninstalled. Now, without competition from a smaller company that had to be more consumer-friendly, they can reduce their pretense of being interested in anything but the customer’s wallet.

celphoneguy

Sorry but this article sounds like it was written by an angry sprint employee or investor. The truth is at&t is more innovative than any other carrier. They are the only true smooth transition to lte, they were the carrier who put reputation aside to bring apple to the market and they have created a competitive market place and enabled non data centric customers to have a smartphone without spending 30 a month. They we’re also the first to drop data pricing from 45 to 30 four years ago. I don’t think you’ve looked at how this will keep handset manufacturers busy producing pentaband phone, allows cell tower companies to create new base station components that will allow for seamless handoffs between all 4 hspa+ bands and give 135 million customers better coverage and a strong path to lte. Please look at this from an unbiased and non anti at&t perspective before you publish such rubbish.

don

So says an AT&T boss man.

My data pricing has been $25 from the start at TMO.

My coverage is fine.

William

What? What transition? They don’t have the backhaul in place to do any transition. They’ve rested on their laurels since they got the iPhone and let their network die on the vine in favor of investor and executive profits.
What reputation did the put aside? Apple’s deal was we get all the profit on the phone, and you get all the profit on the data plans. AT&T didn’t put anything aside.

This brings nothing to the table for the consumer, the US job market, nor the handset manufacturers. The only thing it does is reduce competition, selection, and diversity abroad and in the US.

You are a shill and a bad one at that.

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