Why AT&T bought T-Mobile
(Mashable) -- AT&T, criticized and even despised for its inability to keep up with growing mobile data usage, thinks it has found the solution to its network woes. And all it will cost the telecom giant is $39 billion and months (or even years) of regulatory hurdles.
In a stunning move, AT&T has acquired T-Mobile USA for a whopping $39 billion from Deutsche Telekom. Along with acquiring approximately 8% of AT&T, Deutsche Telekom will also be gaining a seat on AT&T's board of directors.
The new combined entity, if it can garner regulatory approval, will be largest carrier in the U.S. by leaps and bounds. AT&T and T-Mobile USA combined have over 25% more subscribers now than Verizon (125+ million vs. 93+ million).
This acquisition isn't about subscriber bases, though; it's about improving AT&T's reliability and preparing it for the 4G era of wireless communication.
The spectrum problem
AT&T's press release tells a very clear story of why AT&T bought T-Mobile and why T-Mobile bought AT&T.
It's no secret that AT&T has a tattered reputation. The iPhone may have brought it millions of new customers and billions in revenue, but the vast increase in data usage has also strained the network to unacceptable levels.
There wouldn't have been so much hype surrounding the Verizon iPhone if AT&T's network didn't drop so many calls and upset so many customers.
And while AT&T is investing billions to upgrade its network, it takes years to get the approval to build new towers, especially in metropolitan areas such as San Francisco. Without a dramatic move, AT&T's network wasn't going to get better anytime soon.
Two sections of AT&T's press release are devoted specifically to this problem. It's a testament to just how crucial this problem is to AT&T's future. The first problem it addresses is spectrum: The wireless carrier simply doesn't have enough wireless spectrum to fuel the accelerating growth it has experienced over the last few years.
"AT&T's mobile data traffic grew 8,000 percent over the past four years and by 2015 it is expected to be eight to 10 times what it was in 2010," AT&T explained in its announcement. "Put another way, all of the mobile traffic volume AT&T carried during 2010 is estimated to be carried in just the first six to seven weeks of 2015."
AT&T believes it will take years until more spectrum is opened up by the U.S. government for mobile broadband use. The simplest way to get its hands on precious broadband is through acquisition, and T-Mobile USA has the most GSM broadband spectrum after AT&T.
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Publisher and/or Author and/or Managing Editor:__Andres Agostini ─ @Futuretronium at Twitter! Futuretronium Book at http://3.ly/rECc