Winners and Losers in the T-Mobile-AT&T Deal

History tells us that mergers take years to plan, years to execute, and years to resolve post-merger problems.

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As a result, the big winner in AT&T’s merger with T-Mobile USA is likely to be AT&T’s largest competitor, Verizon Wireless.  Indeed, Verizon is starting to sound like a cheerleader for it to take place.  “We’ve been through a series of great acquisitions and great integration into our company,” said Dan Mead, the company’s CEO.  He added that he does not concur with those who say that the deal is bad for consumers.

Although AT&T is projecting that the deal will close within 12 months, given the likelihood of resistance from competitors, government regulators, and consumer groups, it could take far longer.  Once the deal closes, AT&T will have to integrate T-Mobile’s customers into the fold, which includes replacing incompatible 3G devices with ones that will work on the AT&T network.  Integration can take years.  Just ask Alcatel and Lucent, which lost billions in the years following their merger, or US Airways, whose integration took three years.

Verizon Wireless, however, will be content to sit on the sidelines.  Indeed, the longer it takes the better for Verizon.

Opposition didn’t take long to appear: competitor Sprint, which will be a distant third in the post-merger marketplace, was leading the charge against the deal within a day of the announcement.  Speaking at an industry event this past Tuesday, Dan Hesse, the company’s CEO, said to great applause that he has “concerns that it would stifle innovation and put too much power in the hands of two.”

Groups such as Consumers Union, Free Press, the Media Access Project, and Public Knowledge have come out against the deal on the grounds that it is anti-competitive and will most likely hurt consumers.  These groups wield some influence with Democratic members of the FCC and as well as on Capitol Hill.

The list of opponents seems to go on forever.  The Computer and Communications Industry Association (CCIA), an industry group that counts Google, Microsoft, and Yahoo as members, has already stated its opposition.  “A deal like this, if not blocked on antitrust grounds, is of deep concern to all the innovative businesses that build everything from apps to handsets.  It would be hypocritical for our nation to talk about unleashing innovation on one hand and then stand by as threats to innovation like this are proposed,” said Ed Black, the group’s president.

T-Mobile customers are also unlikely to be looking forward to the merger.  Basex has been a corporate customer of T-Mobile for 13 years, in part due to the excellent customer service that the company has always provided.  From personal experience, I can attest to the fact that every call I have ever had to make for technical support was handled as if I were the only customer the company had to deal with.  Service was personalized, the reps have always been friendly and knowledgeable, and they seemed genuinely concerned about whatever problem I was reporting.  They also had an excellent track record of resolving these problems.

The future of this deal is far from certain.  AT&T, by virtue of a $3 billion breakup fee due to T-Mobile USA parent Deutsche Telekom if the deal doesn’t close, is betting it can win approval.  This is one bet I wouldn’t necessarily make.

This Analyst Opinion is also available online at

Jonathan B. Spira is CEO and Chief Analyst at Basex.  H

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