Some in the industry may be wondering why AT&T recently decided to shell out a reported $39 Billion to acquire T-mobile from Deutsche Telekom. Although the combined entity will boast 125 million subscribers (more than 25% larger than Verizon’s 93 million subscribers), the real reason is that AT&T desperately needs to acquire network capacity. Arguably, AT&T’s reputation has undergone a severe beating in recent years. While the iPhone added millions of new customers to AT&T’s base, it also was partly responsible for a nearly 8000% increase in data traffic over the last four years. The Verizon iPhone is big news largely because customers are tired of dropped calls on AT&T’s network.
Ironically, T-mobile’s advertising over the last year or so has touted the difference between their network and AT&T’s, but in the more serious arena of business decision-making, AT&T’s choices were to build their network slowly over years, negotiating with local communities everywhere for permission to build new towers or to simply acquire the capacity that’s already in place. It is a smart move by AT&T, but by no means a slam dunk. They must still clear the significant regulatory hurdles of the T-mobile acquisition, so that the new capacity is still probably a year or more in the future.