LTE upgrade key AT&T/T-Mobile driver

Mike Jude/Frost & Sullivan
21 Jul 2011

The recent play by AT&T to acquire T-Mobile USA was an inevitable consequence of the evolution of the wireless space from simple voice services to data services. As networks evolve to become end-to-end IP, and more consumers switch from feature phones to smartphones, networks are being challenged to provide unprecedented amounts of throughput. All of this requires massive reconfigurations and wireless network upgrades.

A wireless network upgrade demands an increasing amount of spectrum and many more cell sites. The reason for this is simple—as demand grows and is expressed as an increased need for throughput, cell site placement must become denser and the cell sites themselves more capable.

As AT&T discovered, deploying a smartphone without substantial spectrum is a prescription for disaster. The iPhone was almost a monumental flop when users found that streaming video would bring the network to its knees. Now AT&T is in the process of deploying LTE. The handwriting is on the wall: If AT&T's LTE rolls out and is anything less than perfect, there will be a rush to the exits, and Verizon and Sprint will benefit.

T-Mobile also has its issues. While it had a fairly substantial deployment of HSPA+, deploying that network pretty much tapped T-Mobile out financially. With its subscription rates declining due largely to the allure of true 4G being deployed by the other carriers, T-Mobile realized that it would very shortly be relegated to last place in the market. Clearly, without access to a large amount of new capital, T-Mobile was doomed in the market.

As a result, the AT&T/T-Mobile merger makes perfect sense. T-Mobile gets access to capital, AT&T gets access to cell sites and spectrum, and rather than having two limited service providers, we now have one fairly substantial service provider in AT&T/T-Mobile.

Of course, Sprint and Verizon hate this; they were licking their chops at the thought of benefiting from the wireless customer churn as LTE rolled out. Nevertheless, in a roundabout way, they too will benefit from the merger.

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