Dec. 20, 2011 at 2:33 PM ET
For customers of T-Mobile USA, the failure of AT&T’s $39 billion bid for their wireless carrier may be a blessing, and not even in disguise. After all, AT&T ranked last in customer satisfaction in a recent Consumer Reports survey, and has suffered from complaints of spotty service and dropped calls in large cities like New York and San Francisco.
Indeed, analysts say that T-Mobile customers will be just fine in the short term, and many will be pleased that they won’t be forced to switch wireless carriers. “Many of them chose T-Mobile in part because it wasn’t AT&T or Verizon,” said Charles Golvin, a principal analyst with Forrester Research. “Overall, more of those customers see this as good news rather than bad.”
And the collapsed deal means that wireless customers will benefit as far as the U.S. Department of Justice is concerned, too. “Had AT&T acquired T-Mobile, consumers in the wireless marketplace would have faced higher prices and reduced innovation," said Sharis Pozen, the Justice Department’s acting assistant attorney general for antitrust, in a statement.
What does the failed merger mean for the wireless customers of both companies for the longer term? Both AT&T and T-Mobile needed extra wireless spectrum; T-Mobile, as a low-cost carrier, never had the network capacity to compete with more cutting edge competitors like Verizon.
T-Mobile may have shored up its wireless spectrum access due to a seven-year roaming agreement forged with AT&T as part of the failed merger, according to Reuters, but it can’t rely on the AT&T coverage alone for the long haul. Analysts say it will either have to acquire some smaller wireless companies to increase its spectrum or find another buyer, and that's most likely Sprint. “It’s really back to the boardroom for T-Mobile to discuss possible options,” Golvin said.
And as far as AT&T goes, it may have lost a few billion dollars with the bungled transaction, but its position as one of the top two wireless carriers (next to Verizon) in the U.S. is solid. And now, it will likely be able to increase pricing for its wireless data plans, according to Oppenheimer & Co. analyst Timothy Horan, who told CNBC that “the worst is behind AT&T.”
Sprint, however, is in the process of trying to create its 4G network, and in a year’s time, its customers will be feeling the pain of network adjustments and lack of additional wireless spectrum. By then, the timing would be right for a Sprint and T-Mobile merger. Horan told CBNC, “In our mind, Sprint and T-Mobile should ultimately combine to get the scale that’s really necessary to compete with what’s really becoming a duopoly here in the wireless sector in the United States, with Verizon and AT&T.”