AT&T Inc. has proposed buying T-Mobile USA for $39 billion, a merger that would create the nation’s largest U.S. wireless carrier. What would this development mean for consumers and the industry? Fareena Sultan, a professor of marketing and the Robert Morrison Fellow in Northeastern University’s College of Business Administration, assesses the impact of the potential deal.
Will this deal face tough regulatory approval?
Yes, because there’s the whole issue of anti-trust. We are going to almost have a duopoly now, with AT&T and Verizon controlling about 60 percent of the wireless market. Regulators will look at this deal closely, and it will take some time before it gets approved. AT&T and other people in the industry expect that.
But I think ultimately this will get approved, because consumers are pushing for better network coverage that can handle the traffic they are generating from data usage.
If it is approved, how will this affect consumers?
One way is through improved coverage. Some rural areas of the country have poor network access, and there is a national desire to extend coverage to a larger portion of the U.S. population. Clearly, by merging these networks, this will be the case. AT&T has identified areas like Texas and Michigan without sufficient rural coverage, and it says this deal will improve access. With smart phone devices, consumers’ data usage has also increased tremendously because they’re not only talking, but also sending pictures and accessing social networks and media. There is definitely a need to get more coverage for consumers to use and improve networks for handling this data traffic. Consumers will also have access to more phones, like T-Mobile customers getting access to the iPhone.
There will be some negative aspects, though. AT&T has indicated it may move away from offering unlimited data plans. They may grandfather in current users, but could cap data usage for new consumers. The other thing is how pricing will take place in a duopoly. Regulators must be careful that the end result doesn’t negatively affect consumers in terms of higher prices. It will also take time for these two networks to merge because they are not exactly compatible networks, so technology issues will need to be resolved.
How will the deal change the landscape of the cell phone service industry and other industries?
In terms of the cell phone industry, this will put pressure on Verizon. But the demand for mobile and data services will continue to grow. In that sense, application developers and marketing firms, for instance, will have a larger audience available to them to build relationships through smart phones. This merger could also be seen as a positive sign for the overall state of the economy.