What Next for T-Mobile?

Steve Wildstrom / December 19th, 2011

AT&T’s proposed $39 billion acquisition of T-Mobile USA has been unraveling ever since the U.S. Justice Dept. sued to block the deal  and was effectively doomed when the Federal Communications Commission said last month that it also was opposed. So it was  a bit of an anticlimax today when AT&T officially called the deal off.

The collapse of the merger leaves T-Mobile’s corporate parent, Deutsche Telekom, $4 billion richer in a termination payment from AT&T. But other than acquiring some spectrum from AT&T as a consolation prize, T-Mobile is left to stagger forward on its own facing the same problems that led DT to seek the AT&T deal in the first place.

T-Mo is in a fairly distant fourth place behind Verizon Wireless, AT&T, and Sprint, has a relatively weak nationwide footprint, and currently has no clear path to LTE, the next generation wireless technology. But finding a new partner won’t be easy. A combination with Sprint looks out of the question because Sprint, with serious financial strains of its own, is occupied salvaging the wreckage of its 4G partner, Clearwire. And Verizon is a nonstarter for the same antitrust reasons that killed the AT&T deal.

Furthermore, a combination with either Sprint or a second-tier carrier, such as US Cellular or C-Spire, would be very difficult technologically. Like AT&T, and unlike nearly every other U.S. carrier, T-Mobile uses GSM network  technology. While LTE may eventually provide a common technology platform for all carriers, the reality is that at least for the next few years, T-Mobile and AT&T will be carrying the bulk of their traffic on GSM-derived protocols (EDGE, UMTS, HSPA), while Verizon, Sprint, and most second-tier networks will run primarily on CDMA 2000 technologies. Trying to mix and match these technologies isn’t impossible, but it would add a huge burden to the already difficult business of wireless mergers.

DT has made it clear that it would much rather get out of the U.S. market than dive in deeper, so a major investment in T-MO USA from its German parent is unlikely. One reason that many consumer groups, and much of the technology industry, opposed the AT&T deal is that T-Mo had earned a reputation for being open to innovative handsets and aggressive pricing. We’ll have to see if they’ll be in a position to keep that up following the non-deal.

At least with AT&T no longer in a position to oppose it, T-Mobile might finally persuade Apple to give it the iPhone.

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.
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