After surprising everybody with their Sunday announcement
that they'd be buying T-Mobile for $39 billion, AT&T today began the difficult process of trying to convince the public and regulators that eliminating one of the four major carriers -- while making AT&T even larger -- is in any way a good deal for consumers. AT&T's sales pitch included a presentation to analysts and the media and this new website
exploring the deal in more detail.
The sales pitch is multi-pronged, with the tip of the AT&T argument being that the deal is somehow patriotic -- given it helps support Obama's goal to cover 95% of the nation in next-generation wireless. AT&T in particular proclaims that if the deal is approved (the old "network upgrades as leverage to get what we want" approach), they'll be able to reach millions of additional households with LTE:
With this transaction, AT&T commits to a significant expansion of robust 4G LTE (Long Term Evolution) deployment to 95 percent of the U.S. population to reach an additional 46.5 million Americans beyond current plans – including rural communities and small towns. This helps achieve the Federal Communications Commission (FCC) and President Obama’s goals to connect “every part of America to the digital age.” T-Mobile USA does not have a clear path to delivering LTE.
The problem with that promise is that, as we noted at the time, Obama's wireless promise was rather hollow
, given he was promising to reach a goal the wireless industry would have achieved in the normal course of business with or without the government's involvement. The 98% goal would also be reached with or without an AT&T-T-Mobile merger. AT&T's second major point is that the deal is necessary due to a looming spectrum crisis:
For different reasons both AT&T and T-Mobile are facing impending spectrum shortages in major markets. AT&T has been at the leading edge of mobile data growth on our network as a result of supporting more smart phones, more tablets and more eReaders than anyone else in the country. This has created an urgent need — an ongoing need for significantly more spectrum to support this explosive demand. T-Mobile is also limited in its spectrum capacity, so much so that T-Mobile has no spectrum to build out an LTE network.
Roughly 70-90% of AT&T's owned spectrum currently sits unused according to an e-mail from industry analyst Dave Burstein. While the FCC has been arguing there's a "spectrum crisis" and that spectrum squatters don't exist
, a significant number of large companies (like AT&T) are currently sitting on massive swaths of the valuable public resource. The deal may help AT&T shore up spectrum in a few select markets, but the deal is not about solving a "spectrum crisis," since AT&T is already swimming in unused spectrum.
AT&T offered up a few other arguments for the deal, claiming consumers will see lower prices and better city coverage -- both claims AT&T customers and those familiar with these kinds of mergers can parse out for themselves.
Framing the merger as a patriotic move aimed at supporting government wireless plans is a clever sales pitch, but it's unlikely to even remotely address the significant and legitimate criticisms this deal will generate. AT&T's presentation is designed entirely to obscure the fact the deal is largely about reducing competition and preventing T-Mobile from evolving into a serious threat. Undiscussed of course is the impact the deal will have on the elimination of redundant employment positions at T-Mobile during a sour economy. Also undiscussed is how exactly growing immensely larger is going to solve AT&T's persistent problem of having the lowest customers satisfaction rating
among the big carriers.