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The AT&T, T-Mobile Merger: Small Business Implications

AT&T Inc.  and German telephone company Deutsche Telekom AG recently announced that they have entered into a definitive agreement under which AT&T will acquire T-Mobile USA from Deutsche Telekom in a cash-and-stock transaction currently valued at approximately $39 billion.

The lofty goals of this acquisition according to the AT&T Press Release are as follows:

  • Provides Fast, Efficient and Certain Solution to Impending Spectrum Exhaust Challenges Facing AT&T and T-Mobile USA in Key Markets Due to Explosive Demand for Mobile Broadband
  • Enhances Network Capacity, Output and Quality in Near Term for Both Companies’ Customers
  • AT&T Commits to Expand 4G LTE Deployment to an Additional 46.5 Million Americans, Including in Rural, Smaller Communities, for a Total of 294 Million or 95% of the U.S. Population
  • Provides 4G LTE Service for T-Mobile USA’s 34 Million Subscribers
  • More Than $8 Billion in Incremental Infrastructure Spend by a U.S. Company over Seven Years, Enabling Nation’s High-Tech Industry, Innovation and Economic Growth
  • Creates Substantial Value for AT&T Shareholders Through Large, Straightforward Synergies

These look like commendable goals and there is certainly enough data to justify why this merger makes sense. But what are the implications for small business owners? For many who have used AT&T’s services, there is no joy about the customer service of the company, especially in the wireless arena. Many have been so frustrated that they switched to T-Mobile. How ironic that they would now be “forced” to deal with AT&T after all.

I do not believe that this has much to do with subscriber base as much as it has to do with the dwindling capacity of AT&T’s infrastructure to handle the the load the success of the iPhone and the tendency of subscribers to opt for “Unlimited” data plans saddled the company with. Notice the hype that surrounded Verizon’s iPhone offering because AT&T could not hold  a call long enough for most users to have a meaningful conversation.

What are the implications of this merger for small businesses who currently have T-Mobile?

The simple answer is that they will have to, at least during the early phase, deal with the crappy customer service they thought they escaped from. There is also the issue of data plans. It could mean that “Unlimited” data plans will either be more expensive or unavailable altogether. This could affect mobile productivity, especially e-mail utilities like Microsoft Exchange and Outlook synchronization. There will also be additional cost involved with the clamor for iPhones, because, as overpriced and over-hyped as they are, everyone wants one.

On the flip side, there may be the need for convergence where everything from internet, telephone, wireless services etc. are now under one vendor – AT&T. I won’t be surprised if the tried to push some element of VOIP and remote services on small businesses.

But more important is the fact that T-Mobile customers will have to buy new handsets and here is why: Spectrum.
According to AT&T’s press release:

Addresses wireless spectrum challenges facing AT&T, T-Mobile USA, their customers, and U.S. policymakers

This transaction quickly provides the spectrum and network efficiencies necessary for AT&T to address impending spectrum exhaust in key markets driven by the exponential growth in mobile broadband traffic on its network. AT&T’s mobile data traffic grew 8,000 percent over the past four years and by 2015 it is expected to be eight to 10 times what it was in 2010. Put another way, all of the mobile traffic volume AT&T carried during 2010 is estimated to be carried in just the first six to seven weeks of 2015. Because AT&T has led the U.S. in smartphones, tablets and e-readers – and as a result, mobile broadband – it requires additional spectrum before new spectrum will become available. In the long term, the entire industry will need additional spectrum to address the explosive growth in demand for mobile broadband.

The bottom line here is that although T-Mobile and AT&T each use GSM (Global System for Mobile Communications) technology, the carriers also use different bands of spectrum to deliver their services. Specifically, T-Mobile uses the spectrum it bought in the AWS (Advanced Wireless Services) spectrum auction in 2006 to build its 3G wireless network and AT&T uses its 850MHz and 1900MHz spectrum which the company also bought at the 2006 auction to deliver its 3G service.  So part of the reason that AT&T wanted T-Mobile in the first place was to get more of the AWS spectrum for its LTE (Long Term Evolution) network.

The rub here is that T-Mobile has no additional spectrum to deploy LTE, since it’s been using the AWS spectrum for its 3G service. What this means is that once AT&T and T-Mobile merge, AT&T will have to move all of T-Mobile’s existing 3G customers (which includes the supposed 4G HSPA+ customers) to AT&T’s 850MHz and 1900MHz spectrum.

As cnet’s Marguerite Reardon notes, the existing T-Mobile 3G HSPA and 4G HSPA+ handsets will no longer work on the AWS spectrum. Hence the need for new handsets.

Charles Golvin of Forrester Research pretty much sums up what to expect, at least during the initial phase of the merger:

For some period of time, customers from either network may find that the quality is not what they would like. [ …] I think what might be more painful for some T-Mobile customers is that they were T-Mobile customers because they didn’t want to be AT&T customers.

 

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