AT&T Looks to Divest Resources to Salvage Merger

by Matt Klassen on September 20, 2011

It looks like the proposed merger between AT&T and T-Mobile isn’t dead in the water yet. Despite facing increasingly resolute resistance to the deal, with regulators like the Department of Justice and competitors like Sprint raising serious anti-competition concerns, the Texas-based telephone company is determined to do anything and everything possible to salvage its mission to become America’s largest communications company.

To that end, AT&T is rumoured to be approaching smaller wireless rivals across the country in an effort to divest both spectrum and customers, clearly as a way of assuaging those antitrust issues.

At first glance this situation may seem like a golden opportunity for some of the wireless lesser lights to finally get a bite of that apple of success, acquiring much needed spectrum and increasing their customer base, but unfortunately for them I would wager that this apple is rotten to the core.

The report, first issued by Bloomberg, sites two anonymous sources that detail AT&T’s current plan to salvage its floundering merger with T-Mobile. America’s second largest wireless communications company is said to be approaching its smaller wireless rivals, including MetroPCS and Leap Wireless, in an effort to sell them spectrum and subscribers as a way of circumventing monopolization concerns.

Further, the company is said to have also reached out to the likes of CenturyLink, Dish Network, and the deal’s most vocal opponent, Sprint Nextel.

As I mentioned, as first glance this sort of divestiture of AT&T’s ample resources seems like a boon for these companies, a shot in the arm that will allow them to bolster their local wireless networks and perhaps even allow them to branch out across the nation. In fact, in a time when all available wireless spectrum in spoken for, some companies may think they’ve just won the lottery.

Truth be told though, I’m just not buying it. While I have no doubt about the veracity of this particular story, if AT&T is looking to selloff some of its spectrum and customers to its smaller rivals on its own volition—as opposed to selling off these resources under the strict mandate and oversight of the FCC and the DOJ—my guess is that AT&T has a plan to recoup its losses.

Bear with me for a moment while I share my own dystopian vision of the future of this deal. First, AT&T takes the initiative in selling off some of its spectrum and subscribers, signing backroom deals that would still grant AT&T access to the divested spectrum in certain metropolitan markets.

Now lets for a moment pretend that this sort of action is enough to convince the FCC and the DOJ to approve the deal. AT&T’s second method of recouping its losses will then focus on its lost customers, a problem easily remedied through a limited time offer of unlimited talk, text, and data for an extremely competitive price. Sure companies like MetroPCS and Sprint will try to match AT&T’s offering, but they simply won’t have the available resources to match such a tantalizing plan.

In the end, I have no doubt that AT&T will sacrifice both spectrum and subscribers in the short term if it means quieting the antitrust concerns and acquiring the needed support for its merger. That said, I would guess that AT&T has also prepared a long term recovery plan, one that will allow the company to recoup all its losses once the merger is complete and the controversy has died down.

Now it’s really just a matter of whether AT&T’s smaller competitors are as pessimistic as I am.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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