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.”
