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AT&T: What It Loses Without T-Mobile

The keyword is capacity for an AT&T that has been buffeted with complaints about dropped calls and poor connections from iPhone fans

Dan Jones

September 2, 2011

3 Min Read
AT&T: What It Loses Without T-Mobile

If the U.S. Department of Justice succeeds in derailing AT&T Inc. (NYSE: T)'s attempted $39 billion merger with T-Mobile US Inc. , finding quick ways to add more radio dens to its 3G network -- rather than a nationwide 4G Long Term Evolution (LTE) deployment -- may be top priority for Ma Bell. (See What Could T-Mobile Do After AT&T? and DoJ Blocks AT&T/T-Mobile Merger.)

Density is key
AT&T has been struggling to cope with the demands placed on its network by millions of new iPhone and other smartphone users over the last few years. Separate from the acquisition plans, the operator is ploughing more investment into backhaul and additional network sites. (See AT&T Mobile Boss: NYC & San Fran Are 'Underperforming', AT&T to Spend $2B More on Wireless in 2010 and AT&T Ups Capex to $20B to Develop 3G & LTE.) Look back at the original press release that AT&T put out, and it lays it out very clearly:

  • At closing, AT&T will immediately gain cell sites equivalent to what would have taken on average five years to build without the transaction and double that in some markets. The combination will increase AT&T’s network density by approximately 30 percent in some of its most populated areas, while avoiding the need to construct additional cell towers.

Got that? With T-Mobile, AT&T would get around 30 percent more cell sites that it could put its radios on, adding more network density in the places were it is needed most: big cities.

The carrier hasn't put a number on how much it might save by not having to build out more of its own sites or rent extra capacity on other towers. We can safely assume, however, that it would be a pretty penny.

Spectrum: The 4G question
AT&T has already started to use its own 700MHz and AWS (1700/2100MHz) spectrum holdings to deploy LTE. The carrier has said that bringing T-Mobile's national AWS spectrum holdings under its wing will allow it to cover up to 97 percent of the American population with 4G.

By April, AT&T was saying that the buyout would allow it to reach 55 million more people in the U.S. with LTE than it could with its own spectrum. It had initially said it could cover an additional 46.5 million Americans with the extra spectrum. (See AT&T: Expect More 4G from T-Mobile Buy.)"Rural and smaller communities will substantially benefit from the expansion of 4G LTE deployment, increasing the competitiveness of the businesses and entrepreneurs in these areas," the carrier said in its original release.

As DSL Reports notes, however, a leaked letter -- accidentally posted by a law firm working for AT&T on the deal -- makes Ma Bell's LTE case appear somewhat more shaky.

The letter says that AT&T estimates that it would cost an additional $3.8 billion for the operator alone to expand its LTE footprint beyond the 80 percent coverage in the U.S. That was its "plan of record" to the 97 percent figure. Quite a difference from the $39 billion that AT&T plans to pay for T-Mobile.

As Light Reading Mobile has reported previously, exactly how T-Mobile's network deployment, which tends to be strong in the cities rather than the sticks, would help AT&T in rural deployments is not too clear either. (See Big AT&T & T-Mobile 4G Buildout Ahead?)

The letter rejiggers many of the established reasons -- scale, capacity, spectrum and the "public good" -- that AT&T has put forward for the merger:

"Overall, the scale and scope of the larger combined wireless business will permit the additional capital investment over a larger revenue base than would be the case absent the merger," the letter states about utilizing T-Mobile's assets to deploy LTE.

Others have a more cynical take:

"The reality appears to be that AT&T is giving Deutsche Telekom $39 billion primarily to reduce market competition," writes DSL Report's Karl Bode. "That price tag eliminates T-Mobile entirely -- and makes Sprint ... more susceptible to failure in the face of 80 percent AT&T/Verizon market domination."

— Dan Jones, Site Editor, Light Reading Mobile

About the Author(s)

Dan Jones

Mobile Editor

Dan is to hats what Will.I.Am is to ridiculous eyewear. Fedora, trilby, tam-o-shanter -- all have graced the Jones pate during his career as the go-to purveyor of mobile essentials.

But hey, Dan is so much more than 4G maps and state-of-the-art headgear. Before joining the Light Reading team in 2002 he was an award-winning cult hit on Broadway (with four 'Toni' awards, two 'Emma' gongs and a 'Brian' to his name) with his one-man show, "Dan Sings the Show Tunes."

His perfectly crafted blogs, falling under the "Jonestown" banner, have been compared to the works of Chekhov. But only by Dan.

He lives in Brooklyn with cats.

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