So much for SprintNextel (NYSE:S).
Deutsche Telekom (PINK:DTEGY) played coy earlier this month when rumors circulated that its T-Mobile USA business was being eyed by the beleaguered Sprint for a potential merger that would both secure DT’s interests in the U.S. and create a more substantial competitor against the telecom titans AT&T (NYSE:T) and Verizon (NYSE:VZ).
AT&T has put the kibosh on that potential outcome with a $39 billion cash and stock deal to acquire to T-Mobile USA.
Even though the deal won’t close for a full year, the far-reaching effects of the acquisition are already apparent. Sprint’s downward spiral is assured, no matter how many partnerships — like the new deal with Google (NASDAQ:GOOG) to bring Google Voice to all its subscribers — it forms.
Sprint’s downfall also means that competition in the mobile industry is going to take place between just two major providers. If AT&T’s subscriber base doesn’t shrink dramatically between now and next March, it will become the largest telecom provider in the U.S.
The question remains though: will T-Mobile’s network help AT&T finally conquer Verizon?
Not really. With Sunday’s deal announcement, AT&T is simply hammering the final nail in a fast-filling coffin when it comes to T-Mobile. The third-string mobile network shed 56,000 3G network subscribers in 2010, ceding them to Verizon and AT&T’s networks. The company made $21.4 billion in revenue last year — flat when compared with 2009 — but it was projected to see bigger declines this year.
The biggest asset coming to AT&T is, presumably T-Mobile’s infrastructure, but given the outlook for the mobile industry over the next few years, it’s difficult to see how much of an asset T-Mobile’s networks will be. Its 3G network, like AT&T’s, is based on the UMTS technology and the two combined will serve 130 million subscribers. 3G network growth in the U.S. may not have peaked yet but it’s going to decline over the coming months as AT&T and Verizon begin to aggressively expand their limited 4G LTE networks.
T-Mobile’s so-called 4G HSPA+ network will hardly be an asset, even though the plan is to retain the HSPA+ standard for use on both networks. On its website, T-Mobile posted answers to “frequently asked questions” regarding the merger on Sunday, saying that the merger “will ensure the deployment of a robust 4G LTE network to 95% of the population.” This will be accomplished by incorporating T-Mobile’s AWS airwaves.
However, by the time this multi-faceted migration takes place, Verizon will likely have already deployed its LTE network across the country. The company is targeting to have its 4G network serving the same population currently covered by its 3G network. A Root Metrics study of 4G network speeds in the U.S. has already found that Verizon’s is the fastest among those in the U.S., especially compared to T-Mobile and AT&T’s HSPA+ offerings.
If it’s available sooner, and is perceived as offering better service than AT&T’s stigmatized network, Verizon’s 4G network will help that company maintain its lead in the U.S. — no matter what T-Mobile brings to AT&T.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.
