AT&T: T-Mobile Acquisition to Solve Capacity Crunch

AT&T says it is struggling to keep pace with the astronomical demand on its mobile networks, but the company has a solution: buy T-Mobile USA. 

AT&T faces network spectrum and capacity constraints more severe than those of any other wireless provider, and this merger provides by far the surest, fastest, and most efficient solution to that challenge,” AT&T stated in its Federal Communications Commission filing this week seeking permission to acquire T-Mobile USA from Deutsche Telekom for $39 billion in cash and stock. The network synergies of this transaction will free up new capacity the functional equivalent of new spectrum in the many urban, suburban, and rural wireless markets where escalating broadband usage is fast consuming existing capacity.”

AT&T revealed its mobile data volumes have climbed by 8000 percent from 2007 through 2010.  To meet the escalating demand on its infrastructure, the company has purchased spectrum in the open market, added thousands of cell sites and taken other measures, as illustrated by $21.1 billion in capital expenditures AT&T has incurred to upgrade its wireless network between 2008 and 2010.

But the Dallas-based telecommunications titan said the measures are proving to be inadequate.

In short, AT&T faces severe capacity constraints and cannot simply wait for the next major auction to resolve them,” said AT&T, which supports 97.5 million wireless customers, including 68 million postpaid subscribers.

AT&T further noted that its smaller rival, T-Mobile USA, faces potential capacity constraints because its parent Deutsche Telekom has said that T-Mobile must find a way to fund itself in the future.

This means that T-Mobile USA would need to fund spectrum acquisitions and other necessary capital investments through its own operations rather than by drawing on the resources of its corporate parent,” wrote Thorsten Langheim, Deutsche Telekoms Senior Vice President of Mergers & Acquisitions, in a declaration prepared for the FCC as part of the AT&T filing.

AT&T told the FCC the network challenges at both companies could harm consumers.

From a consumers perspective, the capacity constraints confronting these companies, if unaddressed, would translate into more dropped and blocked calls, slower speeds, and access to fewer and less advanced applications,” the company said. More generally, these capital constraints could hinder innovation in Americas mobile broadband ecosystem.”

AT&T said the merger would enable it to deploy LTE fourth-generation mobile services to more than 97 percent of Americans, or roughly 55 million more people than under its current plans.

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