EL SEGUNDO, CA — With its purchase of T-Mobile USA, AT&T Inc. appears to be continuing to use acquisitions to gain control of more of the limited supply of wireless spectrum required to compete in the market for 4G services. AT&T announced it will buy T-Mobile USA from Deutsche Telekom AG in a deal worth $39 billion.
The deal represents the second acquisition that AT&T has undertaken recently that will give it additional 4G spectrum. AT&T in December 2010 expanded its long-term evolution (LTE) downlink bandwidth by acquiring Qualcomm Inc.’s defunct MediaFlo mobile TV service.
The addition of T-Mobile’s spectrum will allow AT&T to immediately gain network capacity and to gain a better competitive position against Sprint Nextel Corp. and Verizon Communications Inc. in the key 4G area. The 4G segment represents a fast-growing portion of the wireless market in North America. Subscriptions to 4G in North America took off in 2010, and the service has become a competitive differentiator for AT&T and competitor Sprint.
AT&T has two options for how to use the T-Mobile spectrum. First, AT&T could continue running the two companies separately, since the two have very distinct subscriber bases.
However, IHS believes AT&T is more likely to take another approach and use T-Mobile’s 1700 band spectrum for its LTE 4G service. This move will require the consolidation of the companies’ 3G networks, migrating T-Mobile 3G customers to AT&T's legacy network, as well as offering the option of a discounted upgrade to T-Mobile's existing 3G customers who don't have the devices to support AT&T's bands. This process could be lengthy.
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