Sponsored By

Can Cricket Save the AT&T/T-Mobile Merger?Can Cricket Save the AT&T/T-Mobile Merger?

AT&T could be looking to Cricket to salvage the deal, but it's not clear that the small carrier would want or need some of T-Mobile's assets

Sarah Thomas

November 29, 2011

3 Min Read
Can Cricket Save the AT&T/T-Mobile Merger?

AT&T Inc. (NYSE: T) may be looking to sell off T-Mobile US Inc. customers and spectrum to small U.S. wireless operator Cricket Communications Inc. as a last-ditch attempt to win approval for its proposed $39 billion acquisition.

But, what -- if anything -- the smaller carrier or its regional competitors stand to gain from such a deal is still unclear.

After AT&T's Thanksgiving admission that it would withdraw its application for Federal Communications Commission (FCC) approval to acquire T-Mobile, The Wall Street Journal reported that the carrier is working on an "audacious 11th-hour deal to salvage the transaction." That potential merger concession includes selling a large chunk of T-Mobile's customer accounts and some of its wireless spectrum. (See AT&T Withdraws T-Mobile Merger Application and FCC Requests Hearing on AT&T/T-Mobile Merger.)

The paper, citing unnamed sources, said the deal would make Cricket the fourth-largest wireless operator in the U.S., while also leaving AT&T with enough T-Mobile spectrum to fulfill its purposes.

MetroPCS wavers on AT&T interest
If this proves true, it could be because Cricket is AT&T's last hope. While the small carrier has traditionally kept quiet on its interest in the merger, MetroPCS Inc. (NYSE: PCS) has been more vocal about its interest in spectrum divested from the merger. Both Ed Chao, SVP of corporate engineering and network operations, and COO Tom Keys have told LR Mobile that the carrier is looking at all its options for spectrum acquisition, including AT&T's potential divestitures.

Check out the video below for Keys' initial reaction to the merger back in March.

But now, MetroPCS could be changing its tune. Bloomberg cites two anonymous sources that indicate the carrier isn't interested in customers or spectrum in as many markets as AT&T needs to sell.

That's because, unlike Cricket, MetroPCS isn't looking to compete on a nationwide basis. Instead, it wants to own its niche in the contract-free space. Cricket, on the other hand, sees nationwide service as its end game, which makes it a more likely candidate for divested assets. It recently signed an MVNO deal with Sprint Corp. (NYSE: S) to distribute its services nationwide at Best Buy retail locations. Customers and spectrum from T-Mobile would further this goal. (See Cricket's First LTE Market Coming Soon and Cricket Leaps to Nationwide.)

AT&T may hear Crickets
That being said, Mizuho Securities USA Inc. analyst Michael Nelson believes even if AT&T does divest to Cricket or other regional carriers, it may not matter. The overlap of current markets between AT&T and T-Mobile with MetroPCS, Cricket and fellow small carrier U.S. Cellular Corp. (NYSE: USM) is unlikely to be enough to satisfy regulatory concerns, Nelson writes in a research note.

"In 17 markets where the AT&T/T-Mobile post-merger concentration would be [greater than] 50%, PCS only operates in 4 markets, LEAP in 6 markets and USM in 2 markets," he writes. And, if the deal is blocked, as he believes will happen, that also means increased price competition from T-Mobile would put the squeeze on MetroPCS and Leap.

"Increased price competition would be negative for the entire industry; however, we believe PCS and LEAP are most at risk since they compete largely on price and we would expect T-Mobile to target prepaid customers," Nelson adds. "However, we expect T-Mobile to hold off implementing overly aggressive pricing until the deal is officially dead."

— Sarah Reedy, Senior Reporter, Light Reading Mobile

About the Author(s)

Sarah Thomas

Director, Women in Comms

Sarah Thomas's love affair with communications began in 2003 when she bought her first cellphone, a pink RAZR, which she duly "bedazzled" with the help of superglue and her dad.

She joined the editorial staff at Light Reading in 2010 and has been covering mobile technologies ever since. Sarah got her start covering telecom in 2007 at Telephony, later Connected Planet, may it rest in peace. Her non-telecom work experience includes a brief foray into public relations at Fleishman-Hillard (her cussin' upset the clients) and a hodge-podge of internships, including spells at Ingram's (Kansas City's business magazine), American Spa magazine (where she was Chief Hot-Tub Correspondent), and the tweens' quiz bible, QuizFest, in NYC.

As Editorial Operations Director, a role she took on in January 2015, Sarah is responsible for the day-to-day management of the non-news content elements on Light Reading.

Sarah received her Bachelor's in Journalism from the University of Missouri-Columbia. She lives in Chicago with her 3DTV, her iPad and a drawer full of smartphone cords.

Away from the world of telecom journalism, Sarah likes to dabble in monster truck racing, becoming part of Team Bigfoot in 2009.

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like