T-Mobile’s consolation prize: No LTE but lots of airwaves

AT&T and T Mobile announce merger in New York

DT CEO René Obermann (left) got the better deal out of AT&T-Mo's failure

Deutsche Telekom has revealed the details of its breakup fee now that the merger of AT&T and T-Mobile USA is officially dead. T-Mobile gets one check for $3 billion, one nationwide roaming agreement, and 128 individual spectrum licenses covering several, though not all, of the biggest markets in the U.S.

That’s quite a haul and it does a lot to ensure T-Mobile’s continued survival as the country’s smallest nationwide operator. But it still doesn’t answer T-Mobile’s most pressing need: An LTE network.

Let’s take the gains one by one:

  • The check: Cash is cash — enough said. We should point out, however, that DT isn’t required to invest that money back into T-Mobile USA. In it’s statement, DT said that the payment would reduce its net debt and boost its credit rating, though whether that money sits on a balance sheet or goes to pay off that debt remains unclear.
  • The roaming agreement: DT didn’t reveal the financial details of the 4G roaming agreement, but it did say the terms are in T-Mobile’s favor. The surprising thing is that DT strike an international roaming deal with AT&T, which would have allowed its European customers to roam in the U.S. at cheaper rates (for DT at least). Instead, the roaming contract is entirely between T-Mobile USA and Ma Bell, which has the net effect of increasing T-Mobile’s addressable HSPA+ footprint by 50 million people for a grand coverage total of 280 million. How much immediate benefit this gives T-Mobile is debatable since most of the smaller operator’s 4G phones don’t support the PCS frequencies used by AT&T’s HSPA+ network. The big exception is the HTC MyTouch, one of T-Mobile’s most popular smartphones.
  • The spectrum: T-Mobile picked up 128 cellular market licenses in the Advanced Wireless Service (AWS band) including spectrum in 12 of the top 20 largest markets: Los Angeles, Dallas, Houston, Atlanta, Washington, Boston, San Francisco, Phoenix, San Diego, Denver, Baltimore and Seattle. DT didn’t identify the specific licenses it won, but a quick glance at AT&T’s spectrum holdings show that these are no paltry chunks of frequencies. AT&T holds a 20 MHz block in Los Angles and Dallas, though its east coast portfolio tends to be confined to the smaller 10 MHz blocks. Unless AT&T is carving up its licenses in weird ways, it’s forking over a lot of bandwidth.

Ultimately T-Mobile can use that spectrum and that roaming agreement to expand its HSPA+ footprint, both in depth and in scope. If it does get access to 20 MHz chunks in LA, Dallas and some smaller markets it will be able to build the equivalent of a new dual-carrier super-HSPA+ network in those cities.

In markets where it only gets 10 MHz it will be able to add another solid carrier, boosting capacity. It won’t be able to use any of those licenses for LTE, though, unless it can somehow piece together a contiguous nationwide 20 MHz block from its old and new AT&T licenses. But it will get the next thing: more overall bandwidth to support more devices and more customers.

Maybe it won’t ever break 20 Mbps download barrier like Verizon and AT&T, but T-Mobile will be able to support millions more connections at perfectly reasonable 5 Mbps to 8 Mbps speeds.

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