AT&T announced plans on Sunday to pay $39 billion in cash and stock for T-Mobile, a deal that would establish AT&T as the U.S. wireless carrier with the most customers and eventually could diminish lobbying efforts on Capitol Hill in opposition to legislation that would reallocate the D Block to public safety.

AT&T currently is the second-largest wireless carrier in the U.S., with T-Mobile in third place. If the deal is approved, AT&T would have about 130 million subscribers and two established nationwide rivals — Verizon and Sprint — in the commercial wireless market.

Such consolidation has caused some observers to express concern about a lack of competition in the commercial wireless market, but most analysts believe federal regulators will approve the proposed merger.

"I think it's going to give regulators pause, but — at the end of the day — I'm not sure they have a choice," Ken Rehbehn, a principal analyst for Yankee Group, said during an interview with Urgent Communications. "The competitive environment of wireless in the United States will have at least three strong players, when this is said and done. I think the FCC and the Department of Justice would have a difficult time justifying turning down the move, especially considering how challenged T-Mobile is with its spectrum position. ... T-Mobile has no spectrum, really, below the AWS block."

Roger Entner of Recon Analytics agreed, noting that fears concerning wireless consolidation have been met with "steady to falling" prices for consumers, which undermines the primary antitrust argument.

From a business perspective, Entner said that AT&T would be getting a "great deal" under the terms of the agreement, which calls for the operator to pay $25 million in cash and stock worth another $14 million.

"They are paying a little bit more than $1,000 [per customer]," Entner said during an interview with Urgent Communications, noting that previous wireless deals typically have cost purchasing carriers about $2,000 per customer.

Prior to the AT&T announcement on Sunday, there was considerable speculation that Sprint would merge with T-Mobile. While a Sprint deal with T-Mobile likely would have been approved quickly by regulators anxious for a stronger third nationwide wireless carrier, the fact that T-Mobile has followed a GSM technology path and Sprint has followed a CDMA technology evolution — complicated by its iDEN network from the previous Nextel merger and its partnership with WiMAX provider Clearwire — would have made network integration a daunting task.

"It would have been a technological challenge, to say the least," Entner said.

To date, T-Mobile and Sprint have been outspoken in their belief that the 700 MHz D Block should be auctioned to commercial carriers, while AT&T and Verizon — carriers that have secured strong 700 MHz spectrum positions — have supported public safety's request to reallocate the D Block for a nationwide, first-responder LTE network. (See "T-Mobile exec gives carrier's perspective on D Block debate.")

An AT&T merger with T-Mobile should be an "encouraging" sign for the public-safety D Block effort, although the benefits may not be realized immediately, according to Harlin McEwen, chairman of the Public Safety Spectrum Trust (PSST), which holds the license to public safety's 700 MHz broadband spectrum and is seeking D Block reallocation.

"It promises to bring one less major distracter from what we're trying to do, but … this acquisition likely is going to take awhile to get approved by the regulators," McEwen said during an interview with Urgent Communications. "What that means is that AT&T isn't in charge of T-Mobile just yet, so I don't know what they're going to do."

Rehbehn echoed this sentiment.

"Until the deal is finalized, T-Mobile has to continue as an independent competitor; they should not be changing their tactics to align with AT&T at this point," he said. "But realistically, will we see the same kind of energy going into the effort that they've put in the past? You've got to question whether that's going to happen.

"I think, at this point, they're going to go into a very quiescent mode, waiting for the deal to be approved an ultimately close."

Related Stories