This weekend, AT&T announced its plans to buy T-Mobile USA for $39 billion, pending regulatory approval. The new company would be the leading mobile telephone (and data) service provider in terms of customers. With the new AT&T soaking up 39% of the mobile market, and with Verizon Wireless at a close second at 31%, this would create an effective duopoly.
This could be good news for AT&T customers who are frustrated with dropped calls, slow data downloads, and spotty 4G service. T-Mobile’s network is easily combined with AT&T’s, as they both function with the same GSM technology.
The U.S. Government Accountability Office, in a study that is proactively cited by AT&T executives strongly in favor of the merger, says that services prices for the consumer have fallen from 1999 through 2009, a period which has seen consolidation of wireless carriers. However, the GAO has recommended to the Federal Communication Commission that regulators should do more to increase competition among carriers and to increase transparency regarding fees and prices.
If the deal goes through, and considering the FCC’s encouragement of mergers and acquisitions recently I expect it will, Verizon Wireless will likely follow suit with a renewed bid for Sprint-Nextel.
Those with basic mobile needs might want to consider alternative options. The big wireless carriers get a lot of attention, but some of the smaller, independent companies can offer basic services at a lower price point. Some of these smaller companies are owned by the major networks or use the major networks’ infrastructure, so they might not be as independent as they first appear. For example, Boost Wireless and Virgin Mobile simply resell use of Sprint’s network.
Pre-paid plans are popular, and for many, cost less than a contract. Most of the mobile providers use slightly different branding for their pre-paid plans, perhaps because they believe the target market is different than for contract-based customers. In fact, since mobile phone companies often require credit checks before customers can be approved for a plan, those without a credit history or with a damaged credit history may be required to enroll in a pre-paid program with an initial deposit.
Financial analysts and consumer groups all have something to say about this deal. Consumer Reports looks at the effects a deal might have on customers: T-Mobile users will likely see rate hikes and Sprint customers who are generally more satisfied than customers of AT&T or T-Mobile will likely be pushed out of the market, but coverage for AT&T and T-Mobile might improve. The fact that the two carriers to be merged operate on different wavelengths, even if they use the same technology otherwise, might hinder coverage consolidation in the short term. Read more from Consumer Reports.
Analysts seem divided. Some think the mobile industry is overdue for consolidation. Others believe fewer choices is not good for the consumer or wireless device vendors and infrastructure suppliers. Read more from the analysts.
What type of mobile carrier do you use? Do you think this acquisition will be beneficial or harmful to the mobile communications industry?
Updated March 24, 2011 and originally published March 21, 2011.