T-Mobile USA and AT&T

This proposed deal seemingly validates AT&T’s strategy going back a handful of years of pushing forward with new technologies, from its bandwidth capacity to innovate phones with many features.  Conversely, around this same time, T-Mobile made the choice to be the value player amongst the mobile operators.  The company purposely delayed investing in its network and in seeking the advanced devices that would benefit from an upgraded network.  For awhile, this decision to follow its competitors worked, as the operator continued to add customers who favored the lower priced plans, even if it meant not having the most current phones.

But as network capacity increased in importance as customers began demanding the newest smartphones, T-Mobile’s strategy left them behind their competitors, with little leeway for catching up.  The decision to sell to AT&T is an acknowledgement that the gap had become too great to bridge on their own.  For AT&T this deals works as a shortcut to gaining needed spectrum to handle mobile data from the feature packed smartphones customers now expect.  Having decided that the government wasn’t freeing up enough spectrum via auctions, they must have decided this was their quickest way to gain capacity.  No doubt Verizon and Sprint are watching this play out with great interest, as they’re probably next up to seek merger approval.

Depending on the whims of the regulators who must approve the deal, it should probably pass.  AT&T has guaranteed T-Mobile USA a large breakup fee of over $6 billion plus other awards should the deal fail.  Regardless, one would think T-Mobile USA’s days as an independent operator are numbered.  While T-Mobile could spin off the operator into a public entity in the event that the merger doesn’t succeed, T-Mobile USA has been losing customers at an alarming rate and would have an extremely difficult time recovering at this point.   Its fate was sealed with those decisions made in the middle of last decade.

Ironically, this means the last of the mobile operators based in the Seattle area is being merged into an entity that already encompasses two previous versions of the same carrier, McCaw Wireless and AT&T Wireless.  We can hope that the mobile sector will still be a thriving industry locally even without a large, national player calling the area home.

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