AT&T's Real Reasons for Wanting T-Mobile
posted Sunday Aug 14, 2011 by Scott Ertz
It's been a while now since AT&T announced their intention to purchase T-Mobile USA for $39 billion in March. The primary reason is nothing has really happened; until now, that is. This week, a document was leaked that calls into question AT&T's real reasoning for the buyout of T-Mobile.
So far, AT&T executives have been explaining it by claiming that it will allow them to increase their LTE network roll-out from 80% population coverage to 97%. The document, however, suggests that AT&T's actual motives are much more sinister and anti-competitive. Essentially, AT&T is willing to pay a massive upcharge to keep T-Mobile out of Sprint's hands.
So, how much are they paying to limit the field of competition? Hit the break to find out.
If we are to assume that AT&T needs T-Mobile to be able to build their network from 80% to 97%, we can calculate that the cost of the 17% build-out is around $3.8 billion. Considering the $39 billion price tag for the network, that means they are willing to pay around $35 billion to ensure Sprint is left, statistically, in the dust.
The letter that has sparked all of this was posted on the FCC website by a law firm that is working with AT&T on the merger deal. The letter has been mostly redacted and has been removed from the website but I would assume that somewhere there is a low-level employee looking for a job at a new firm. In addition, AT&T has gone into damage control mode. Margaret Boles, an AT&T spokeswoman, said,
While certain merger opponents refuse to acknowledge the clear benefits of AT&T's LTE buildout commitment, they have never operated a network or run a business and they offer nothing but baseless speculation that conveniently ignores the facts. The bottom line is that without this merger, AT&T could not make this expanded LTE commitment. Federal regulators have before them the facts that demonstrate that this merger will unleash billions of dollars in badly needed investment, creating many thousands of well-paying jobs, both of which are vitally needed given our weakened economy.
It's not often that a company uses the "job creation" tagline unless they are trying to hide something else. In reality, we know that the purchase of T-Mobile will cause the elimination of jobs, such as sales representative, as well as the decommissioning of redundant hardware and store locations. I don't believe there has been any doubt in anyone's mind what the reasons behind the purchase were, but it is nice to know that internally, AT&T is as aware as the rest of us.
It will be fun to see if the recognition of a large company taking out a lower-cost competitor and keeping the hardware out of the hands of another will ultimately come back and legitimately hurt AT&T's chances or if this is already a done deal. What do you think? Tell us in the comments section.