The combination of AT&T and T-Mobile would create by far the world's largest wireless company and raises the question of what the other two carriers-Verizon Wireless and Sprint-might do in response.
According to Verizon CEO Daniel Mead, the answer for his company, at least for now, is to carry on as planned. During a panel discussion at the CTIA 2011 Wireless conference in Orlando, Fla., May 21, Mead said Verizon is in good shape regardless of what AT&T and T-Mobile do. However, analysts say Sprint may be more vulnerable, should the $39 billion deal between AT&T and T-Mobile clear regulatory hurdles.
A merger between Verizon-currently the world's largest carrier-and Sprint seems unlikely. During the March 21 panel discussion, Verizon's Mead said his company has no interest in partnering with Sprint. While Verizon has "built a foundation of great spectrum" through a number of acquisitions, Mead said, he sees no need to pair up with Sprint in response to AT&T's intentions to purchase T-Mobile.
"We're extremely confident of where we're at," Mead said.
In a interview with Reuters prior to the panel discussion, he said, "We're not interested in Sprint. We don't need them."
If the AT&T deal is approved, it would combine the subscriber bases of the nation's second- and fourth-largest wireless carriers, knocking Verizon from the top position. It would also leave Sprint, which ranks third with nearly 50 million customers, holding onto its ranking though knocking it some distance from Verizon, with its 101 million-plus subscribers. AT&T, with T-Mobile folded in, could total 130 million subscribers.
"Can Sprint survive?" Consumer Reports asked in a March 21 blog post. "Probably not ... at least in its present form and size."
Gartner analyst Phillip Redman believes the AT&T deal could push Sprint "to look at a merger strategy outside the wireless market-cable operators most likely," he wrote in a March 21 research note.
It could take more than a year for the AT&T deal to clear various regulatory hurdles, and will likely hinge on AT&T making a number of concessions, something Verizon's Mead expects to happen. "Anything can go through if you make enough concessions," he told Reuters. Until the deal goes through, however, it will remain unclear what AT&T plans to do with T-Mobile, Lara Biddiscombe, global account director with analysis firm Kantar Worldpanel U.S., told eWEEK. When U.K. carrier Orange purchased T-Mobile U.K., she said, it let T-Mobile U.K. stand alone.
That doesn't appear to be what AT&T currently has in mind, however. During the CTIA panel discussion, AT&T Mobility and Consumer Markets President and CEO Ralph de la Vega said the carrier's bid for T-Mobile was driven by its need for additional spectrum. The acquisition, he said, could help "alleviate the crunch by allowing the networks to be combined and more efficiently utilize that spectrum."
Not looking like quite the hearty top-four competitor it once did, should Sprint be worried about customers jumping ship, as rumors circulate about its need for a fortifying partner?
Biddiscombe insists that Sprint is still "not an insignificant player." Plus, she added, for all of carriers' talk and fears about churn, "there's not actually that much carrier switching. It's quite a hassle, and most people only do it if they feel they're not getting the level of service they want, or when one carrier has an exclusive brand, as AT&T did with the Apple iPhone."
While Sprint has struggled in the marketplace over the last few years, a turnaround in its customer service has been a particular point of pride. In February, it announced its twelfth consecutive quarter of improvement in customer satisfaction and first-call resolution, and days later, it was named J.D. Power and Associates' 2011 Customer Service Champions.
Sprint recently also faced a setback, of sorts, with Verizon Wireless acquiring an Apple iPhone 4 of its own-a challenge it's fighting against with a rich device portfolio featuring a number of 4G-enabled smartphones.
"Our customers not only have a strong device lineup, but they get a lot of value with what we provide them," Sprint CEO Dan Hesse said during a Feb. 10 financial earnings call. "I'm not saying there won't be an impact from Verizon getting the iPhone, but we are doing what we can to make sure our customers stay with us and continue to have attractive offers out in the marketplace."
According to Biddiscombe, this might just be enough, even in light of a major competitor growing significantly larger.
"As long as customer service is good, and network service is good, and they continue to launch new phone models-things like that that keep their offer fresh," she told eWEEK, "I don't think they have too much to worry about."