* T-Mobile may emerge stronger, scrappier without deal
* Sprint would face more aggressive competitor
* MetroPCS, LEAP lose out on assets, face postpaid rival
By Nicola Leske
NEW YORK Nov 25 Driven by antitrust concerns,
U.S. regulators are fighting hard to block AT&T's $39
billion deal to buy Deutsche Telekom's T-Mobile USA.
But, in an ironic twist, smaller U.S. wireless rivals may
suffer more if the deal is blocked than if it is approved.
T-Mobile USA would emerge as a stronger, scrappier
competitor thanks in large part to the hefty breakup fee it is
entitled under the AT&T deal. And on its own, it is likely to
fight harder for the low end of the market that is currently
the playing ground for the likes of Sprint Nextel Corp,
MetroPCS Communications Inc and Leap Wireless
International , analysts said.
T-Mobile USA will "emerge as a stronger, more formidable
competitor once the uncertainty of the merger has elapsed and
its network quality is enhanced via the acquisition of the AT&T
spectrum assets," said Jim Breen, an analyst at William Blair.
The AT&T deal -- the largest transaction announced this
year -- has run into serious obstacles both at the Department
of Justice and at the Federal Communications Commission, which
worry about the antitrust implications of a merger of the No. 2
and No. 4 U.S. wireless carriers.
AT&T has said it would withdraw its application to the FCC
to focus on persuading the Justice Department. The company also
said it would take a $4 billion charge to account for a breakup
fee in case the takeover fails.
Under the terms of the merger agreement, a failed deal
would entitle T-Mobile USA to $3 billion in cash plus spectrum
and roaming agreements.
In a research note, Moody's said that could also lead to a
network sharing deal between the two companies, reasoning that
it "would make sense given the spectrum that AT&T will have to
cede to T-Mobile and the 3G roaming agreement between the
That would make life especially hard for No. 3 U.S. carrier
Sprint, which has been one of the most vocal opponents of the
AT&T/T-Mobile deal, going so far as to file a lawsuit.
William Blair's Breen predicts that because Sprint and
T-Mobile serve similar segments of the market, Sprint will have
to try and match T-Mobile's aggressive pricing to win postpaid
customers, thereby diluting its average revenue per user.
"In terms of recruiting new subscribers, Sprint will no
longer have the luxury of being the only value postpaid carrier
in the market," Breen said.
Smaller rivals such as MetroPCS and Leap Wireless may be
affected even more because T-Mobile is eyeing similar customer
A failure to close the AT&T deal will turn T-Mobile into an
even more aggressive competitor for urban prepaid users from
MetroPCS and Leap would also lose an opportunity to buy
T-Mobile USA assets that AT&T would have had to divest to
overcome antitrust objections from regulators.
There has been speculation that AT&T -- in a move to
assuage the DoJ's concerns -- could bolster MetroPCS' position
to ensure that there is a fourth national competitor in the
market but MetroPCS has made it clear that it has no ambitions
to become a national carrier.
Representatives for MetroPCS, Leap Wireless and Sprint were
not immediately available for comment.
The one winner from the uncertainty over the deal is the
largest U.S. wireless carrier, Verizon Communications ,
Moody's said. Verizon gets room to execute its strategy while
competitors try to salvage the transaction, Moody's said.