LTE rollout key to AT&T purchase of T-Mobile USA for US$39bn

21 Mar 2011

AT&T has promised fourth-generation (4G) long term evolution (LTE) coverage across 95pc of the US following its agreement to buy T-Mobile USA from Deutsche Telekom for US$39bn.

The sale has been agreed by the boards of both AT&T and Deutsche Telekom. AT&T says it will be in a position to provide 4G LTE data coverage to an additional 46.5m Americans beyond existing plans, including rural communities and small towns.

AT&T said this helps achieve the Federal Communications Commission (FCC) and President Barack Obama’s goals to connect “every part of America to the digital age.” T-Mobile USA did not have a clear path to delivering LTE.

As part of the transaction, Deutsche Telekom will receive an equity stake in AT&T that, based on the terms of the agreement, would give Deutsche Telekom an 8pc shareholding. A Deutsche Telekom representative will join the AT&T board of directors.

“This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation’s future,” said Randall Stephenson, AT&T chairman and CEO.

“It will improve network quality, and it will bring advanced LTE capabilities to more than 294m people. Mobile broadband networks drive economic opportunity everywhere, and they enable the expanding high-tech ecosystem that includes device makers, cloud and content providers, app developers, customers and more. During the past few years, America’s high-tech industry has delivered innovation at unprecedented speed, and this combination will accelerate its continued growth.”

He added: “We are confident in our ability to execute a seamless integration, and with additional spectrum and network capabilities, we can better meet our customers’ current demands, build for the future and help achieve the President’s goals for a high-speed, wirelessly connected America.” 

AT&T said the US wireless industry – one  of the most competitive in the world – will remain so after the acquisition. For example, in 18 of the top 20 US local markets, there are five or more providers.

Local market competition is escalating among larger carriers, low-cost carriers and several regional wireless players with nationwide service plans. This intense competition is only increasing with the build-out of new 4G networks and the emergence of new market entrants. 

“Our common network technology makes this a logical combination and provides an efficient path to gaining the spectrum and network assets needed to provide T-Mobile customers with 4G LTE and the best devices,” said Deutsche Telekom chairman and CEO René Obermann.

“Also, the transaction returns significant value to Deutsche Telekom shareholders and allows us to retain exposure to the US market,” Obermann said.

Rationale behind the acquisition of T-Mobile USA

AT&T’s mobile data traffic grew 8,000pc over the past four years and by 2015 it is expected to be eight to 10 times what it was in 2010.

Put another way, all of the mobile traffic volume AT&T carried during 2010 is estimated to be carried in just the first six to seven weeks of 2015.

Because AT&T has led the US in smartphones, tablets and e-readers – and as a result, mobile broadband – it requires additional spectrum before new spectrum will become available. In the long term, the entire industry will need additional spectrum to address the explosive growth in demand for mobile broadband. 

AT&T and T-Mobile USA customers will see service improvements – including improved voice quality – as a result of additional spectrum, increased cell tower density and broader network infrastructure. At closing, AT&T will immediately gain cell sites equivalent to what would have taken, on average, five years to build without the transaction, and double that in some markets.

The combination will increase AT&T’s network density by about 30pc in some of its most populated areas, while avoiding the need to construct additional cell towers.

In terms of area covered, the transaction enables 4G LTE deployment to an additional 1.2m square miles, equivalent to 4.5 times the size of the state of Texas.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years