The US$39 billion deal, announced Sunday but still awaiting regulatory approval, would create the biggest mobile operator in the U.S., with about 130 million subscribers. It would also allow AT&T to expand its planned LTE (Long-Term Evolution) footprint by an additional 46.5 million U.S. residents, bringing the fast 4G cellular network to 95 percent of the country's population, according to the companies.
Spectrum is the lifeblood of wireless networks, because the wider a band of frequencies a network can use, the more speed and capacity it can deliver to users. That makes it a highly sought-after resource. The need for spectrum has It has also contributed to many of the big mergers in the mobile business, including the complex relationship between Sprint Nextel and WiMax operator Clearwire, which formed a new company so they could pool spectrum in the same band.
In the case of AT&T and T-Mobile, both carriers say they face impending spectrum exhaustion without some new arrangement. That danger is real, especially for T-Mobile, and for AT&T in areas such as California, according to analyst Phil Marshall of Tolaga Research. Pooling its spectrum with T-Mobile's could help AT&T solve the data crunch that has led to complaints about iPhone performance in some cities, and give T-Mobile a path to LTE, Marshall said.
But more than that, the larger pool of spectrum could give the merged carrier an advantage against rivals such as Verizon Wireless in introducing faster services, he said.
Consumers might not see the full benefits of AT&T's expanded spectrum for two years or more, but buying T-Mobile was the fastest way to get hold of the additional resources, according to John Stankey, president and CEO of AT&T Business Solutions.