AT&T and T-Mobile Will Slow Innovation

Om Malik wrote a good piece on this merger; it’s fairly old news at this point.   I’m pretty sure I dislike this deal and I think it’s going to inhibit American entrepreneurs from accelerating innovation in mobile.

Strategically, the proposed $39 Billion cash and stock deal that’s been put up by AT&T to acquire T-mobile is risky for the company.  AT&T  is justifying the price of the acquisition by claiming synergies, the NPV of which excede the total purchase price of T-Mobile (yes, you read that correctly, but they said the same thing last time).  AT&T also has a $3 Bn. breakup fee, so if the FCC and DOJ decide that they don’t like the deal for anticompetitive reasons, it’s going to be expensive for them to fix.

Right now, AT&T has about 95.5 million subscribers and T-Mobile is hanging out with 34 million.  Verizon has about 100 million users, so while this won’t create a monopoly, it will definitely create a duopoly when it comes to national coverage.  Proponents of this merger point out that with the high CAPEX required to invest in cellular networks, this merger will allow for AT&T to invest in improving its network.  While this sounds great, I have trouble seeing how a company that locks in over half of the market, subjects its customers to two-year contracts and  has a competitor that uses incompatible technology (CDMA vs. GPRS) will be particularly interested in high CAPEX projects.  It’s too difficult to switch,  so why bother?

Right now applications are driving innovation while wireless carriers are falling behind.  I may be cynical, but I have a lot of trouble seeing how this deal works out well for anyone other than AT&T and T-Mobile shareholders.


    1. With decreased ctioetmpion, prices WILL increase, choices WILL eliminated, restrictive usage patterns WILL be imposed, pay-per-service WILL happen, and customers will suffer in many more ways. This a total loss for TMobile customers. They gain nothing at all. Any benefits they may potentially get will involved being moved over to AT&T. This is something they could do today. Whether they do it today or tomorrow, they will be required to pay the significantly higher prices with less usage. This is how AT&T performed other mergers. When forcing TMobile customers on to the already overcrowded AT&T network, legacy AT&T customers will see worse service as the network will not be able to handle the added demands. It will take years for any technical benefits, if ever, and customers WILL be required to purchase new devices to realize any benefits at all. This is a Lose Situation for consumers.

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