AT&T Drops $39 Billion T-Mobile Bid
AT&T Drops $39 Billion T-Mobile Bid

On the eve of the mobile phone industry's annual CTIA Wireless conference, AT&T dropped the bombshell news that it is acquiring rival T-Mobile for $39 billion. The move has all manner of repercussions for the wireless market, should it pass regulatory review. Assuming it does, here's what it means for the music industry:

-- Customers:
At the end of 2010 AT&T and T-Mobile combined had 130 million and Verizon had 94 million. The deal would make AT&T again the No. 1 mobile operator in the country. And by adding T-Mobile's 33 million users to its base, that's a lot more potential iPhone buyers. And a combined AT&T/T-Mobile would make it the only GSM carrier in the country (Verizon and others use CDMA) and the only choice for subscribers who want phones that work in Europe.

-- Spectrum:
Along with T-Mobile's customers, AT&T would get its spectrum-assets that if used wisely could mean better coverage and capacity for high-bandwidth multimedia services like streaming music and video, particularly in rural areas. It also means AT&T would be able to more quickly roll out its next-generation LTE network faster, which would improve multimedia services dramatically. This is something to watch closely because the FCC could deny AT&T access to T-Mobile's spectrum as a condition to the Justice Department's approval of the deal. Such a move could effectively kill the deal, as acquisition of spectrum was one of the top reasons AT&T gave as rationale for the move.

--Competition:

The deal pits AT&T against Verizon as the two major nationwide mobile operators, with Sprint a distant third. Combined, Verizon and AT&T (after the merger) would control just over 70% of U.S. mobile users. The immediate consumer concern then revolves around pricing. If either starts to charge higher for data and/or media services, that could affect adoption of the kinds of free music apps that have sparked the resurgence of mobile music. It also means labels and publishers have fewer partners to play against each other when striking direct mobile music licensing deals with carriers. And if the rivals start exerting more control over what apps become available from smartphones on their network, the entire app ecosystem could be in jeopardy.

--Sprint:
Sprint had 50 million subscribers at the end of last year. The now-even-more-distant third place mobile operator needs to make a move of its own to stay competitive with these new behemoths. It either buys up even smaller operators like MetroPCS, Cricket Wireless, U.S. Cellular and so on, or it goes up for sale itself. Sprint was the first mobile operator to launch a full-song music download service, so where it goes is of interest to music labels. Verizon would be one obvious choice of buyer (their networks use the same technology), but there are other non obvious choices. Comcast is one, adding a wireless component to its cable business.

-- Regulatory Backbone:
Consumer groups and Net Neutrality watchdogs are up in arms over this proposed deal. But few think the Justice Department will have the backbone to block it, afraid of being seen as anti-business or anti-jobs. As the music industry looks to another potential big-league merger of its own (perhaps WMG/EMI?), the outcome of this deal could provide some interesting tea leaf reading.

Questions? Comments? Let us know: @billboardbiz

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