AT&T, T-Mobile merger not great deal for app ecosystem?

Mar 21, 2011

There were four. In a year, there will be three. And beyond that, there easily could be just two. So goes consolidation in the mobile phone industry in the USA.

AT&T (T) expects in about a year to take over T-Mobile, the US division of Deutsche Telekom AG (DTEGY.PK), in a $39 billion cash and stock deal. The merger of the No. 2 and No. 4 carriers will create the largest mobile carrier in this country, blowing past current No. 1 Verizon (VZ) Wireless.

Many had expected that Sprint (S) and T-Mobile would merge. Now, perhaps, Sprint will be merged with Verizon Wireless, the current No. 1 company and in 12 months likely to be No. 2.

What’s it all mean for apps fans and developers?

— App fans, don’t look for iPhones or iPads from Apple (AAPL) on the T-Mobile network.

T-Mobile stressed in a Q&A: “T-Mobile USA remains an independent company. The acquisition is expected to be completed in approximately 12 months. We do not offer the iPhone. We offer cutting edge devices like the Samsung (005930.KS) Galaxy S 4G and coming soon our new Sidekick 4G.”

Still, in the long run, AT&T hopes to win over acquired customers. Fortune notes Apple could be a winner: “It will have expanded the addressable market for its mobile phones and tablets by nearly 34 million potential customers.”

— Will things get better for app developers, device makers, consumers and everyone else in the ecosystem?

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Not surprisingly, AT&T said yes.

Of the deal, Randall Stephenson, AT&T Chairman and CEO said, “It will improve network quality, and it will bring advanced LTE capabilities to more than 294 million people. Mobile broadband networks drive economic opportunity everywhere, and they enable the expanding high-tech ecosystem that includes device makers, cloud and content providers, app developers, customers, and more. During the past few years, America’s high-tech industry has delivered innovation at unprecedented speed, and this combination will accelerate its continued growth.”

— Innovation?

“Don’t believe the hype,” said S. Derek Turner, research director at watchdog Free Press. “There is nothing about having less competition that will benefit wireless consumers. A market this concentrated — where the top four companies already control 90 percent of the business, and two of them want to merge — means nothing but higher prices and fewer choices.”

Om Malik reports at GigaOm said the deal is “just bad for wireless innovation, which means bad news for consumers. T-Mobile has been pretty experimental and innovative: It has experimented with newer technologies such as UMA, built its own handsets and has generally been a more consumer-centric company. AT&T, on the other hand, has the innovation of a lead pencil and has the mentality more suited to a monopoly: a position it wants to regain.”

— AT&T could make gains with Android from Google (GOOG), one of T-Mobile’s strengths.

But Rob Jackson at Phandroid noted that T-Mobile was the first to launch an Android Phone, “a testament to the underdog taking risks whereas the industry giants can afford to play ‘wait-and-see’ or become complacent with their current offerings.”

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— Watch for AT&T to start its own app store.

Malik said: “Don’t be surprised if you see AT&T impose its own will on what apps and service are put on its Android smartphones. I wouldn’t be surprised to see the worst phone company in the U.S. (according to Consumer Reports) try to create its own app store and force everyone to buy apps through it.”

— Sorry, price for service won’t be decreasing.

Forrester research analyst Charles Golvin said: “The cost of that service won’t come down nearly as fast as customers would like, since AT&T and Verizon Wireless combined would own nearly three out of every four wireless subscriptions in the US. While clearly troublesome for Sprint and other mobile smaller mobile competitors. It’s also bad news for cable operators, whose incipient mobility products will suffer in comparison to what AT&T and Verizon can offer.”

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