AT&T to buy T-Mobile USA, puts Android at risk
updated 03:20 pm EDT, Sun March 20, 2011
ATT agrees to buy T-Mobile USA for 39 billion
AT&T in a dramatic turn has said it will buy T-Mobile USA for $39 billion. The combination of cash and stock is mutual and will create what will be the largest carrier in the US by a wide margin, at over 130 million customers. Its deal will also give T-Mobile clear expansion into LTE-based 4G instead of the purely HSPA+ 3G path from before.
Coverage would also get better by increasing the number of cell sites in a given area; the move would give the equivalent of five years of expansion.
The two companies insisted that carrier competition would stay in the US as there were five or more carriers in 18 of the top 20 cities. Battles between both larger and smaller carriers were "escalating," the companies said, and would get fiercer with 4G creating a more common battleground. The deal still depends on regulatory approval as well as a breakup fee if the deal soured.
Both expected the deal to complete within a year.
The takeover comes despite repeated, strong rumors of a Sprint/T-Mobile deal and could lead to a major upset in smartphone market share. As long as T-Mobile cell sites begin using AT&T frequencies, the merger would automatically grant T-Mobile users the iPhone without Apple having to develop a separate version. T-Mobile's need to use the rare 1,700MHz band has often meant that it needed special-run versions of a phone or was locked out entirely.
Android could face some of the greatest damage from the deal. T-Mobile was the original Android carrier and has always been the first to get Google's "halo" phones, including the G1, myTouch 3G, Nexus One, and Nexus S. It quickly lost the position after Verizon launched the Motorola Droid but has always contributed significant share. AT&T has always been dominated by the iPhone, even after the launch of flagship phones like the Motorola Atrix and Samsung Captivate, and could see some T-Mobile users trade in Android or go to the iPhone as their first smartphone.
Incidental effects are also likely for tablets, since T-Mobile users would now have access to the iPad, not just Android hardware like the LG G-Slate.
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With no Sprint iPhone, Android can still maintain 50/50 share against iPhone as long as iPhone "only" outsells Android by 2.5-to-1 on AT&TMo/Verizon. We know that iPhone has outsold Android by more than 2.5-to-1 on AT&T, but we don't know what the Verizon numbers look like yet.