T-Mobile might Suffer if AT&T Deal Fails

When AT&T agreed to shop for T-Mobile USA in March, the deal gave the impression of a contented fate for an organization that had been losing customers and facing declining sales.

But ought to the lawsuit filed by the Justice Department on Wednesday kill the proposed merger, some analysts say it may leave T-Mobile during a a lot of worse position than it absolutely was before the deal was announced, its competitiveness sapped by months spent in limbo.

“This could be a business that's treading water,” said Robin Bienenstock, an analyst at Sanford C. Bernstein & Company who tracks T-Mobile and Deutsche Telekom, its parent company. “They ought to return into the market within the meantime, and that they are attending to ought to work out some way to create momentum in their core business.”

T-Mobile has long staked its name on giving low-cost service plans. however in recent months, the corporate has lost ground to its larger rivals, AT&T, Verizon Wireless and Sprint, that have lured away subscribers with common devices just like the iPhone and also the promise of faster networks and services.

The company’s position is very precarious given the evolving state of the wireless business, that is increasingly centered on customers willing to get expensive smartphones and also the knowledge plans that keep company with them. it'll be tougher for an organization that emphasizes lower costs to remain afloat in that market, specialists say.

T-Mobile’s share of the u.  s. wireless market has slipped to ten p.c from twelve p.c in 2008, in line with Chetan Sharma, an freelance wireless analyst. “The biggest downside has been stagnant adds,” he said, which means new subscribers. Over the last eight quarters, the mobile business has added a web thirty three million customers; T-Mobile has added solely eighty nine,000 of these.

But T-Mobile might have one ace up its sleeve, said Ms. Bienenstock: a network that's not clogged with innumerable data-guzzling users. And though T-Mobile has not nonetheless begun to roll out LTE, the fourth-generation wireless technology that its peers are already using or putting in place place, it's invested giant sums in upgrading its existing network, that uses a technology known as HSPA+ that analysts say rivals the speeds of LTE.

The company may try and charm to folks yearning for an inexpensive thanks to stream movies, songs and alternative content on their smartphones and tablets — a tactic that would have leverage, considering that AT&T and Verizon each recently place limits on what quantity knowledge customers may use while not paying further. T-Mobile is additional lenient with the bounds on most of its plans, slowing the access speeds for its heaviest users rather than charging additional.

“They have a comparatively empty and quick network,” said Ms. Bienenstock. “You will sell low-cost knowledge and create it pretty profitable.”

But T-Mobile’s biggest challenge could also be that it's now not the sole worth proposition for mobile subscribers.

Consumer Reports found that customers spent $20 to $50 less per month using T-Mobile than with carriers like AT&T and Verizon. however lots of smaller contenders are trying to expand their share of the market, together with Virgin Mobile, Boost Mobile, Leap and MetroPCS.

“For a protracted time, they were the worth whole for tykes and teenagers,” said Jan Dawson, an analyst at Ovum, a technology analysis firm. “It’s obtaining quite crowded in their core territory. Their solely hope could also be to reinvent themselves entirely.”

T-Mobile failed to reply to missive of invitation for comment. Its parent company issued an announcement on Wednesday saying that it'd be part of AT&T in defending the merger set up in court.

Complicating matters for T-Mobile is that it's largely remained motionless for many months whereas looking ahead to the deal to shut. it's probably, analysts say, that T-Mobile froze any negotiations with Apple and alternative hardware vendors over new phones to avoid competing with AT&T on pricing and unharness dates.

That could hinder the carrier’s ability to dazzle potential subscribers with new smartphones within the coming back months — a severe handicap to growth if the corporate weren't attending to be folded into AT&T.

The plot thickens if Apple announces a touch upon Sprint to distribute the iPhone, as is widely expected. that might leave T-Mobile because the nation’s solely major carrier while not the phone.

The Web has been packed with speculation that anyone from Google to Sprint might accelerate with a bid to shop for T-Mobile. however analysts say that's unlikely to happen, largely as a result of Sprint is already grappling with a way to mix many technologies into one cohesive network. Adding T-Mobile’s technology to the combo would be a rich and Sisyphean task.

It is additionally unlikely that an organization like Google or Apple would toss its hat into the ring, say analysts, despite indications that each firms are trying to remodel the communications business. Neither would need the headache of running a telecommunications network or to run the danger of souring relations with alternative carrier partners.

In the longer run, analysts say, it appears probably that Deutsche Telekom, that has long itched for some way to exit the u.  s. market, can either spin T-Mobile off as an freelance entity or hunt for ways that to sell items of the corporate.

Some analysts say that a global company like NTT DoCoMo of Japan, France Télécom or Telefónica of Spain that desires to ascertain a footprint within the u.  s. may look to feature T-Mobile to its portfolio.

Others say T-Mobile may look engaging to a cable company like Comcast or Time Warner which will need to enter the wireless market. T-Mobile has five,400 cellular base stations, beating Verizon, that owns solely four,300.

Regardless of the result, analysts say T-Mobile is probably going to eventually shift hands, ideally to a replacement owner that may not upset the Justice Department.

“Deutsche Telekom has created it terribly clear that they don’t have any want to take a position additional within the U.S. market and that they don’t need to be the long-term house owners of this asset,” said Ms. Bienenstock of Sanford C. Bernstein. “But it'll be terribly valuable to somebody.”