1st December 2011
Post
When an internal AT&T email said they could build out their network for $3.9 billion, it’s no wonder the Department of Justice and the FCC barfed all a $39 billion merger. This deal was all about 1) AT&T paying $1,000 per T-Mobile subscriber to get future contract revenue, and 2) Deutsche Telekom trying to get out of a US market that’s too competitive.
Why AT&T thought this was a good idea is beyond me. Not only would they have to spend billions aligning wireless infrastructure (remember, AT&T and T-Mobile use different frequencies for 3G data) but they’d have to keep the 25% of T-Mobile subscribers that are pre-paid from bailing out for a better deal.
I’ve done deals in my career (million $, not billion) and I can attest that sometimes the deal gets done despite the some glaring questions in the business premise. Somewhere in the org chart of AT&T, someone said “we got to do something HUGE!” Adding 33 million new subscribers in one deal is HUGE. Spending money to build out a network isn’t.
The Carriers are driven by subscriber numbers and ARPU. Maybe it’s time to pick some more metrics to measure long term success. The Oil industry doesn’t get more valuable buying other companies wells. They get more valuable by drilling new wells.
