Roundup: AT&T Buys T-Mobile for $39 Billion

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AT&T has agreed to buy T-Mobile USA from parent Deutsche Telekom for $39 billion in cash and stock, the companies said Sunday. “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 294 million people.” AT&T said the acquisition will increase its infrastructure investment in the U.S. by more than $8 billion over seven years.

What’s the data center angle? One possibility is consolidation of data center space as AT&T seeks to squeeze savings and “synergies” out of the acquisition. AT&T has 38 data centers, which house more than  2.6 million square feet of data center and hosting spaces across five continents. T-Mobile recently built a $250 million data center in East Wenatchee, Washington, a better location than a T-Mobile data center in Bothell, Wash. that was flooded during heavy rains in 2007. As a new facility in an area where power is green and dirt cheap, the Wenatchee site seems likely to shape up as a valuable asset for AT&T.

T-Mobile is also a major tenant at 32 Avenue of the Americas, a major telecom hotel in New York City that was built by AT&T and served as the company’s headquarters for many years. AT&T sold the property to Rudin Management in 2000, while maintaining offices at the building.

The deal announcement prompted a flurry of coverage around the web. Here’s our roundup of noteworthycommentary and analysis:

  • eWeek.com – The blockbuster deal makes sense on a number of levels, starting with the fact that both run GSM technology, an important characteristic for network compatibility. The buyout is a bailout for Deutsche Telekom’s wireless unit, but it would stand to make AT&T easily the largest U.S. carrier if the deal passes regulatory muster and is consummated. Perhaps more importantly, it would help AT&T ramp up its 4G LTE network plans, which have yet to come to fruition at a time when Verizon, Sprint and T-Mobile all hitched their wagons to the speedy next-generation wireless technology.
  • GigaOm – It is hard to find winners apart from AT&T and T-Mobile shareholders. It doesn’t matter how you look at it, this is just bad for wireless innovation, which means bad news for consumers. T-Mobile has been pretty experimental and innovative – it has experiment with newer technologies such as UMA, built its own handsets and has generally been a more consumer centric company. AT&T on the other hand has innovation of a lead pencil and has the mentality more suited to a monopoly – a position it wants to regain.
  • Mashable - This acquisition isn’t about subscriber bases, it’s about improving AT&T’s reliability and preparing it for the 4G era of wireless communication. It’s no secret that AT&T has a tattered reputation. The iPhone may have brought it millions of new customers and billions in revenue, but the vast increase in data usage has also strained the network to unacceptable levels. There wouldn’t have been so much hype surrounding the Verizon iPhone if AT&T’s network didn’t drop so many calls and upset so many customers.
  • NYTimes.com – Already, some critics say the deal could result in higher prices for consumers. T-Mobile had offered some of the lowest rates in the country. While AT&T is expected to honor current T-Mobile contracts, it is likely that once those expire, T-Mobile customers may have to pay AT&T’s higher rates. Still, according to the U.S. Government Accountability Office, cellular subscription costs fell 50 percent between 1999 and 2009, a period in which the industry has consolidated.
  • mocoNews - It’s been an open secret in the wireless world for a few months now that T-Mobile’s parent company was considering ways to offload the carrier, but most expected T-Mobile to eventually wind up with Sprint despite network integration issues that could have been messy. By hooking up with AT&T, T-Mobile now plans to pursue the LTE path to the so-called 4G wireless networking era, the companies said in the press release.
  • VentureBeat – Clearly, this deal is going to test the Obama administration’s stance on antitrust, as the Federal Trade Commission and the Justice Department have to approve the deal. By addressing the competition issue up front, it’s clear that AT&T realizes it has something to worry about.
  • GeekWire - Philipp Humm, the CEO and president of T-Mobile, acknowledged that the “news is unexpected and may be somewhat unsettling” but said he’s “confident that our strong culture and T-Mobile USA Values will help guide us through this process.” He called the deal “the best possible solution for our business and for our customers.”
  • Light Reading Mobile – AT&T’s plans to acquire T-Mobile USA could make Sprint Nextel Corp. an attractive candidate for Verizon Wireless to snatch up. If the deal passes regulatory approvals in the U.S., being acquired by Verizon may be the nation’s third-largest carrier’s only option to compete in such a consolidated environment.
  • Ars Technica - In recent months, T-Mobile advertising has been laying into AT&T, criticizing the carrier for hobbling a hot phone with slow network speeds. Either that was a form of flirting, or AT&T decided it needed to silence those commercials once and for all.

About the Author

Rich Miller is the founder and editor-in-chief of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.

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