On March 20, AT&T announced that it plans to buy Germany-based Deutsche Telekom’s American division, better known as T-Mobile, for $39 billion. This combined user base of 130 million will catapult AT&T past Verizon in number of subscribers, over a third of the population of the U.S. This also gives AT&T a monopoly over the GSM cellular bands. What exactly does that mean? Well, America loves to be special in everything, as seen by Verizon and Sprint’s use of a standard called CDMA. AT&T and T-Mobile use the worldwide standard that has 85% of global share called GSM. The biggest difference is that GSM uses the SIM card, and CDMA does not.
Will it pass? That’s the first question. AT&T has been swaggering into Washington with seemingly uncanny arrogance. But in truth, they are the number two lobbying influence in Washington. Since 1989, the company has given legislators over $46 million, leaning Republican with 55% of spending. AT&T is so confident that it has offered T-Mobile $3 billion and precious wireless bands if the deal does not go through. AT&T’s army of 90 lobbyists will do their best to make sure it passes, and they promise that the deal will provide more access to their up-and-coming 4G networks, increase speeds by diluting users over more spectrum, and reduce costs from consolidation.
Deutsche Telekom (DT) and AT&T are the biggest winners by far. T-Mobile was DT’s least successful branch, and is losing significant numbers of subscribers. Now the deal has boosted its stock price, and it has unloaded a big liability. AT&T will now obviously be bigger than Verizon, have more subscribers, and be generally able to have more power to lord over their customers.
So what of those customers? Their picture does not look very good. T-Mobile customers will feel the most hurt. They will fall under AT&T’s policy of billing for next month’s charges, higher fees, capped data plans, no more unlock codes for phones, and slower data. But they will get rollover minutes, something no one has cared about since maybe 2003. T-Mobile was net loss for DT because they undercut AT&T and Verizon’s prices. Now AT&T has that thorn taken care of, and has more consumers to impose its will upon.
Many others stand to lose privilege because of this. Google and its Android phone makers will certainly suffer. T-Mobile was the first adopter of Android with the G1, continued with its support of Google’s phone the Nexus One and now the Nexus S, and has respected the open source philosophy. AT&T and Verizon, however, have no noble notions about it. AT&T’s first Android phone, the HTC Aria, had its privileges locked since Day 1, prohibited sideloading apps from the Internet, and loaded it down with plenty of bloatware. (Verizon is better, but not by much.) All phone makers and equipment makers will also suffer, since they have no more leverage by having 2 GSM networks to cater to.
As a whole, AT&T and Deutsche Telekom are the only ones poised to benefit from this move. Everyone else, from Google to HTC to you, the consumer, will find something objectionable. And the aggravating thing is, there really isn’t anything that can be done about it.
By Simon Wu, Tech Editor ’12