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The AT&T/T-Mobile USA Merger: A Balanced View

I’ve seen more pontification on the proposed merger of AT&T and T-Mobile. Unfortunately, most of it falls into one of two categories: shilling by AT&T (or lobbyists paid by AT&T) or from companies like Sprint, who have come out against the proposed merger. The following is my take, which is that of a consumer.

To be clear, I use both AT&T and T-Mobile today. My work phone is an iPhone 3GS, which is obviously AT&T. For my family, I have a series of T-Mobile prepaid SIM cards. Both serve their intended purpose nicely. There are some areas where either T-Mobile or AT&T don’t work so well. Having access to both sets of towers would be really nice.

Looking at the bigger potential anti-competitive concerns, I’m actually not convinced that it’s a bad thing. Yes, there merger, if it goes through as currently proposed, would result in 80% of the mobile phone subscribers in the US would be in the hands of two rather large companies that descended from Ma Bell: AT&T and Verizon.

From watching past acquisitions, what will likely happen is the following:

  • In individual markets where the combination of T-Mobile + AT&T would constitute a substantial majority of customers, T-Mobile’s network in that market will be spun off and sold to someone else. This will likely add to the market share numbers for Sprint and smaller, regional carriers.
  • People who have existing T-Mobile rate plans after the merger will be grandfathered in–assuming they make no changes to their service. I expect the very affordable T-Mobile rateplans to disappear post-merger.
  • The various government agencies will likely use this opportunity to extract certain concessions out of AT&T (e.g. on net neutrality or something else) in exchange for approval on this merger.

One thing that AT&T will get out of this deal: the vast majority of roaming revenue from people traveling from overseas. This is because T-Mobile and AT&T are the only major GSM carriers in the US, and the rest of the world uses GSM.

This same dynamic played itself out in Canada recently. Rogers was the only GSM carrier up until a few years ago when Bell and Telus (both CDMA carriers) jointly built a GSM network to provide an alternative (not to mention, allow them to sell the iPhone).

Assuming this goes through, I would expect both Verizon and Sprint to accelerate their LTE plans and converge on the same global standard as AT&T, providing a variety of roaming options for foreign visitors, and to spread around the roaming revenue.

Another reason they might accelerate these plans: for people who travel outside the US often. If you do, the only rational choice is a GSM-based provider, else you will need to maintain two or more phones, or choose from a very limited selection of “global” phones from one of the other providers. When this merger goes through, the only major GSM-based provider will be AT&T (the other is T-Mobile).

Where I expect to lose out, aside from a lack of choice in GSM providers, is T-Mobile’s great prepaid service. It is by far the best deal of the major operators. I like that after $100 in renewals, all future minute purchases expire in a year! This works great for my kids mobile phones, which do not get that much usage in a month, much less a year! Also, I expect T-Mobile’s “Pay As You Go data Web DayPass”–a very affordable $1.49 per 24 hours–to be discontinued.

Will this merger be ultimately good? It has good and bad points, so for me, the jury is still out. Will it go through? No question that it will, as much as people–and the competition–may not want it to. It will be another year or so before it does, though. Meanwhile, all I can do is sit back and watch the rhetoric fly back and forth.

#Cybersecurity Evangelist, Podcaster, #noagenda Producer, Frequenter of shiny metal tubes, Expressor of personal opinions, and of course, a coffee achiever.