What next for AT&T and T-Mobile USA?

What next for AT&T and T-Mobile USA?

Following the breakdown of AT&T’s proposed acquisition of T-Mobile USA, the market is rife with rumours over what steps both companies will now to take to counter the impact of the failed deal.

The ramifications for AT&T are clear, with the company required to pay Deutsche Telekom between $3 billion and $6 billion in break fees, hand over additional spectrum worth $1 billion, and it is now left without the spectrum allocation it needs to satisfy demand.

The situation for T-Mobile USA, or its parent company Deutsche Telekom, is slightly more tenuous, with the Financial Times reporting today the company had already set out a survival plan with failure in mind, and now could be the time for it to sell its extensive network of 7000 mobile towers to fund additional investments for a 4G network based on LTE.

This move, while only raising approximately $2 billion, could help leverage the company’s interest in wireless spectrum, with a view to potentially rolling out new broadband wireless data services in other markets.

Newswire Reuters has a different take on the matter, and reports that T-Mobile chief executive Rene Obermann will either look at new ways to invest in the US, or find a new strategy to exit the market. When the AT&T tie up with T-Mobile USA was announced in March, many analysts touted Sprint as a better option for consolidation, in a deal that would have left Deutsche Telekom with a remaining stake in a ‘Sprint/T-Mobile’ merger.

The underlying problem for Deutsche Telekom now is its lack of spectrum in the US market, which it failed to acquire in the country’s latest auction with the view its US entity would be sold to AT&T. It has also had to deal with a constant falling subscriber rate, as investments from its three larger competitors became stronger over recent years.

There are also rumours in the market that Deutsche Telekom will look to divest its stake in UK mobile operator Everything Everywhere as a result of the failed deal with AT&T, and make it a wholly-owned France Telecom Orange network operator.

To address AT&T’s need for additional spectrum to keep up with demand for data services, Reuters have reported the company may be in the market to acquire US providers Dish Networks or Clearwire Corporation. Watchers tout both companies as potential AT&T targets because of Dish Networks airwave availability and Clearwire’s need for funding to address its large spectrum availability. AT&T is expected to move quickly in a bid to counter Verizon’s proposed purchase of spectrum from SpectrumCo.

Gift this article