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AT&T to acquire T-Mobile: Sign of US markets consolidating

Posted in Industry updates by Manas Ganguly on March 21, 2011
US wireless markets split by operators

US wireless markets split by operators

AT&T would acquire T-Mobile USA from Deutsche Telekom in a cash and stock transaction valued at $39 billion by the next 12 months and is awaiting the go ahead of regulatory authorities. This would make AT&T, the leading operator in USA with nearly 39% of US wireless market shareand $79 billion in revenues with 128 million subscribers.

AT&T’s surprise $39-billion acquisition of T-Mobile USA Inc. could lead to more consolidation in the U.S wireless industry, leaving the market with just two dominant providers — and the prospect of higher rates and fewer choices for consumers. The potential market shift could force Verizon to consider making a large acquisition itself, analysts said, possibly including Sprint. But Sprint itself may snap up one or more of the many smaller providers, such as U.S. Cellular and MetroPCS.

This is a surprising development that leaves Sprint a distant third behind AT&T and Verizon. The deal delivers multiple benefits to AT&T, most notably valuable spectrum to aid capacity issues and support 4G LTE roll out.AT&T asserted that the deal would increase competition and lower prices. AT&T also said that the merger would allow it to accelerate the spread of faster, next-generation wireless service —4G. Besides the synergies and savings from closing overlapping retail stores and call centers, AT&T absorbing T-Mobile’s network will give it more spectrum to manage the data traffic surge that the market has seen inthe last few years. According to data sources, data traffic has surged by 8000% over the last 4 years after the introduction of iPhone.

However, regulatory approval in this case may prove challenging. federal antitrust and telecommunications regulators such as the Federal Communications Commission and the Justice Department are likely to weigh the benefits of market and technical efficiencies achieved by the merger against the potential loss of competition. Regulators are also likely to scrutinize the combined market share for both Internet broadband services and wireless telephone services.

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