You know those T-Mobile TV commercials with the young woman poking fun at the iPhone because AT&Ts network is hanging around its neck like an albatross? Guess you wont be seeing those anymore.
In a world of mega-mergers, your archrival can go from hated enemy to best pal in one day. So it goes with AT&T and T-Mobile USA, which will become one company if a $39 billion cash-and-stock deal between AT&T and T-Mobile parent, Deutsche Telekom, is approved.
Its no gimme. The government is sure to look closely at a deal that combines Americas No. 2 and No. 4 wireless providers, creating a gigantic provider that easily surpasses Verizon Wireless as the carrier with the most subscribers. The deal would add about 35 million subs to AT&Ts rolls. But in the end, its likely regulators will determine that theres still enough choice out there among the giant companies and the smaller, regional providers.
Not so sure about the slam dunk is Credit Suisse Groups Jonathan Chaplin, who, in an investors note, said regulatory risk is enormous.” He did say, however, that its a potential win-win for both companies, as theres a huge upside for AT&T” and DT [is] getting a great price.”
Broadband expansion is likely to be a big winner in the deal. In an interview with Bloomberg, AT&T CEO Randall Stephenson said the carrier would expand its LTE rollout and potentially reach more than 45 million new customers.
And since no discussion of the big wireless providers is complete without mentioning Apples iPhone, you might be wondering what the future holds for the popular device. T-Mobile announced that it has no immediate plans to sell it. AT&T lost its exclusive stranglehold on the iPhone to Verizon Wireless last month. There will always be those customers who are loyal to Verizon Wireless, but this deal would certainly render the exclusivity loss as far less impactful.
Since the iPhone has meant so much to AT&Ts earnings in the past few years, many in the industry have argued that AT&T needed to be aggressive or risk falling farther behind Verizon Wireless this certainly qualifies. There could be some immediate financial benefit for carriers involved in this super team-up; some analysts believe they could save $40 billion by combining operations.
Speaking of financials, AT&Ts stock price was up nearly 2 percent in Monday morning trading as of 11:17 ET. The news was even better for DT, which saw its stock climb 12 percent in just a few hours. The opposite was true for Sprint, which was rumored to be in talks with DT for a similar deal before Sundays AT&T-T-Mobile announcement. Sprints stock price was down almost 14 percent. The doom and gloom is likely to persist for Sprint, which has been losing subscribers; the No. 3 wireless company is now likely to be left even further behind its bigger rivals.
There are a lot of questions that remain to be answered, leading to mixed reaction from the analyst community. Thomas Wehmeier of Infroma Telecoms & Media says the possible sale is a move predicted by few, but one that will dramatically alter the structure of the U.S. mobile industry” He says AT&T might not be getting a deal when it comes to price, but its about stocking up on its supply of the basic raw materials that drive a successful operator business, namely spectrum, sites, stores and customer scale.” Wehmeier doesnt expect customers will be significantly affected, at least in the short-term.
Analysys Masons Steve Hilton wonders about the impact the merger will have in the enterprise space. Pointing out that DT will now have a seat on AT&Ts board, and that DT owns T-Systems, an AT&T competitor in the global communications and IT systems integration business, Hilton says this is a case of strange bedfellows at best and potential market hanky-panky at worst.”