…And Then There Were Three
AT&T just announced that they will purchase T-Mobile USA from Deutsche Telekom for $39 billion. This transaction – even after the FCC and DOJ force significant divestitures – will make AT&T the largest wireless carrier in the United States. This will leave AT&T, Verizon (NYSE:VZ), and Sprint (NYSE:S) as the big three wireless carriers in the domestic U.S. market.The wireless industry will have 12 months to figure out the implications of this deal, but it will certainly have adverse impacts to equipment manufacturers who just saw there customer base shrink by one quarter. Let’s not forget the tower companies. Unlike AT&T and Verizon, T-Mobile had yet to commit to long term extensions on their collocation agreements with American Tower (NYSE:AMT) and Crown Castle International (NYSE:CCI) in trade for favorable LTE collocation pricing. Certainly, the value of the T-Mobile Towers that are (probably now “were”) for sale has taken a hit.
This move by AT&T could put pressure on Sprint, already a distant number 3 to Verizon and AT&T, to make some purchases of its own. It would certainly provide incentive for Sprint to bid aggressively for markets that will have to be divested in order to complete the transaction. Large enough divestitures could also provide interesting opportunities for US Cellular, as they have the cash and management skill to acquire divested markets as well.