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A 'Million Reasons' Why AT&T's European Expansion Is a Bad Idea

By Craig Galbraith
January 18, 2013 - News

**Editor's Note: Please click here for a recap of the biggest channel-impacting mergers in Q4 2012 or here for the biggest M&A during that time in the service provider-BSS/OSS spaces.**

AT&T better think long and hard before it considers buying a wireless operator in Europe.

News broke Thursday that America's second-largest carrier might try to buy one of is counterparts in the U.K., the Netherlands or Germany before the end of 2013. A failed merger attempt with T-Mobile USA last year shows that big acquisitions in the U.S. would likely be tough sledding for the company.

“There are a million reasons why this [European M&A]  looks like a bad idea, and only one why it just might make sense," noted Yankee Group VP of research, Declan Lonergan, commenting a Wall Street Journal article. "On the negative side of the equation, take your pick from these: Europe’s ongoing economic difficulties, tough telecom industry regulators, saturated mobile markets, fiercely competitive local markets, limited cross-border consolidation opportunities, 4G networks requiring significant upgrades and investments. It’s a long list. However, on the positive side, there is one factor that AT&T might just be considering: in Europe, things can only get better! This region once led the rest of the world in mobile communications. It also used to have pretty decent economies, driven by the prospect of closer EU integration and a common market."

SoftBank of Japan recently announced plans to buy 70 percent of Sprint, and T-Mobile USA is trying to acquire MetroPCS, so AT&T's competition at home is getting stronger.

"Though it’s hard to see an upturn right now, there is no doubt Europe’s economies and its telecommunications industry will eventually turn the corner," Lonergan added. "The relentless cutbacks in consumer spending that have been an unwelcome but inevitable feature of recent years will eventually give way to renewed consumer confidence. When that happens, Europe’s mobile operators will be well positioned to benefit, and particularly so once they have completed their 4G/LTE network deployments. For large numbers of European citizens and business owners, the future may not appear particularly bright right now, but things will eventually get better. The question is: When that happens, which side of the pond will AT&T be watching from?"

Follow senior online managing editor @Craig_Galbraith on Twitter.

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