NEW YORK : AT&T stunned the telecom world on Sunday by announcing that it has agreed to pay $39 billion in cash and stock for T-Mobile USA. Potentially making AT&T the No. 1 wireless provider with 39% of the market.
AT&T says the combination would give it the airwave spectrum it needs to handle the soaring demand for mobile broadband services as consumers snap up smartphones and tablet computers such as Apple's iPad.
"We have seen over the last four years on our network alone mobile broadband traffic climb by 8,000%," AT&T CEO Randall Stephenson says. The company expects that demand to increase as much as 1,000% over the next five years.
As a result, Stephenson says, "We as a company have to think differently about how we address the demands that we're seeing." Many consumers blasted AT&T for tolerating dropped calls after 2007, when it was the exclusive service provider for Apple's popular iPhone.Verizon recently also began to offer the iPhone 4.
AT&T says that the deal with T-Mobile would increase its broadband capacity in some large cities by as much as 30%. T-Mobile, which is owned by Germany's Deutsche Telekom, uses the same basic phone service transmission technology that AT&T uses.
Consumer advocates, though, urged federal antitrust officials to block the deal. They warn that AT&T and Verizon could create a wireless duopoly, resulting in higher prices and fewer choices for customers. Verizon had 31.3% of mobile subscribers at the end of 2010, according to research firm ComScore. Sprint, which was widely reported to have been considering a merger with T-Mobile, has 11.9% of the market.
"There is nothing about having less competition that will benefit wireless consumers," says S. Derek Turner, research director of activist group Free Press.
AT&T says, though, that wireless prices have fallen over the last decade, even after the government approved mergers including AT&T with Cingular and Sprint with Nextel. Sen. Jay Rockefeller, D-W.Va., urges the Justice Department and Federal Communications Commission to "leave no stone unturned in determining what the impact of this is on the American people."
But if AT&T and T-Mobile join forces, that could lead to a series of deals. Verizon likely would "reconsider a potential bid for Sprint," says Dan Hays of management consulting firm PRTM. And Sprint may "add to its heft with a roll-up of some combination of U.S. Cellular, Metro PCS or Leap Wireless International."
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