Bonn - T-Mobile's service footprint will expand, and service could improve in its existing markets, as a result of the large amount of spectrum that the carrier is getting as part of a breakup fee that AT&T must pay now that the proposal to merge the AT&T and T-Mobile networks has fallen through.
The break-up fee includes $3 billion in cash to T-Mobile parent Deutsche Telekom, which is applying it to reduce debt. The fee also includes a large package of AWS (advanced Wireless Services) 1700/2100MHz spectrum in 128 cellular market areas (CMAs), including 12 of the top 20 markets. The 12 are Los Angeles, Dallas, Houston, Atlanta, Washington, Boston, San Francisco, Phoenix, San Diego, Denver, Baltimore and Seattle). The value of the spectrum has been placed at $1 billion.
The breakup fee also includes a seven-year roaming agreement that lets T-Mobile subscribers roam onto AT&T's network, enabling T-Mobile to "improve its footprint significantly among the U.S. population and offer its customers better broadband coverage for mobile communications services in the future," Deutsche Telekom said. T-Mobile's population coverage will increase from 230 million potential customers to 280 million. Coverage will be extended to many regions of the U.S. in which T-Mobile did not operate its own network or have roaming agreements to offer service.
The cash that Deutsche Telekom is getting directly reduces Deutsche Telekom's net debt, the parent company said.
The extra spectrum gives T-Mobile the ability to improve its 4G HSPA+ coverage and service, but the parent company wants to withdraw from the U.S. market and has not invested in plans to bring 4G LTE to the U.S. even though the three other national carriers are adopting that more-spectrum-efficient technology.
Industry observers believe Deutsch Telekom will either sell off T-Mobile to investors or sell it off to a smaller carrier in need of spectrum.
In its statement, Deutsche Telekom said it and AT&T "are in agreement that the broad opposition by the U.S. Department of Justice (DoJ) and the U.S. telecommunications regulator (FCC) is making it increasingly unlikely that the transaction will close." The company also complained that it and AT&T "are of the opinion that important arguments in support of the transaction have been ignored, such as the significant improvement in high-speed mobile network coverage for the U.S. market, as well as the positive employment effects."
Deutsche Telekom also disclosed that it and AT&T offered "concessions" to the government "in terms of the scope and structure of the transaction," but regulators have "no indication that either authority would move away from [their] non-supportive stance."
Last night, AT&T announced that it and Deutsche Telekom have dropped plans for AT&T to acquire Deutsche Telekom's T-Mobile network in the U.S.
AT&T said it would recognize a pretax accounting charge of $4 billion in the fourth quarter to reflect a break-up fee of $3 billion plus $1 billion in AT&T spectrum.
The merger "would have offered an interim solution to [the country's wireless] spectrum shortage," AT&T contended in a written statement. "In the absence of such steps, customers will be harmed and needed investment will be stifled."
"To meet the needs of our customers, we will continue to invest [in the AT&T network]," said Randall Stephenson, AT&T chairman/CEO. "However, adding capacity to meet these needs will require policymakers to do two things. First, in the near term, they should allow the free markets to work so that additional spectrum is available to meet the immediate needs of the U.S. wireless industry, including expeditiously approving our acquisition of unused Qualcomm spectrum currently pending before the FCC. Second, policymakers should enact legislation to meet our nation's longer-term spectrum needs."