In March 2011, AT&T announced plans to acquire T-Mobile for a reported $39 billion. The acquisition would have made AT&T the largest mobile carrier in the US with roughly 135 million subscribers.
Immediately, the deal was under scrutiny. Observers wondered if US regulators would be against the merger on grounds that the US mobile environment would become less competitive. In August, the US Department of Justice (DOJ) answered that question by suing to block the acquisition.
AT&T initially intended to fight the lawsuit. One of the issues raised by the DOJ was that by having one larger carrier as opposed to two large national carriers, fewer people would be able to have access to next generation LTE. AT&T said that in combination with T-Mobile, the expanded AT&T would have 98% US coverage. Without T-Mobile, AT&T said that it could only provide LTE service to 85% of the US population. In essence, a combined AT&T and T-Mobile would have greater population coverage (POP) than the two networks could provide as competitors.
Time is of the essence for mobile operators. For AT&T, the time and expense of fighting the action from the DOJ was prohibitive. On December 20, AT&T and T-Mobile announced that the deal was disbanded.
Dependent upon spectrum, QoS (quality of service) goals, and desired penetration rates, a mobile operator must deploy between 60,000-70,000 LTE-capable base stations to provide blanket coverage in the US. A combined AT&T and T-Mobile would have been able to pick the best cell tower locations and benefit from having one set of wholesale partnerships. Alone, each company would have to duplicate their infrastructures in order to offer LTE services.
When the AT&T acquisition of T-Mobile was first announced, the natural assumption was that cellular infrastructure suppliers were losing an opportunity to sell to a major US operator. This is a market with high ASP items; for example, an LTE-capable base station is $30,000, and core management products, routers, and transition to backhaul equipment runs between $10-15,000 per macro base station. When AT&T and T-Mobile agreed to dissolve their deal, the reaction was swift on Wall Street. AT&T’s preferred vendors Alcatel-Lucent, Cisco, Ericsson, and Juniper Networks traded much higher in the Tuesday afternoon sessions Alcatel-Lucent was up 10.6%. Juniper, Cisco, and Ericsson shares grew 9.3%, 4.1%, and 3.6%, respectively.
The larger consequences of the collapse of the AT&T-T-Mobile deal are not yet known. However, cellular infrastructure suppliers, if not publicly expressing joy, were nonetheless pleased by this sudden development in the US telecom market.