AT&T and T-Mobile

T-Mobile

Introduction

T-Mobile is a German-owned subsidiary of Duetsche Telekom. It was founded in 1990, and is headquartered in Bonn Germany. It specialises in mobile communications and DSL services. The firm also sells wireless devices such as mobile phones and iPads.

The Company has employed 36,000 people under its wing; they are located in Europe, The United States, The Virgin Islands, and Puerto Rico. In Europe, T-Mobile has a presence in Austria, Croatia, Germany, Czech Republic, Hungary, Macedonia, Montenegro, Slovakia, The Netherlands, and the United Kingdom. This organisation is ranked third among telecom company multinationals of the world. However, in terms of the number of subscribers, the firm is the twelfth internationally. It has about 150 million consumers.

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Company history

The organisation was initiated in 1990 when the state-owned Duetsche Bundespot provided the first mobile telecommunications services. These services were eventually placed under DeTeMobil. Duetsche Bundespot was later called Duetsche Telekom in 1995, and was privatised in 1996.

The wireless communication subsidiary was called T-Mobile. In 2002, international operations were anglicised from T-Mobil to T-Mobile. T-Mobile was eventually called Telekom in the parent country. Consequently, the brand – T-Mobile is officially recognised in international markets only.

Impacts

The company recorded revenue earnings of $18.7 billion in 2010 in the United States. In the international market, the organisation reported revenues of 62.4 billion Euros. Most of its sales came from the provision of its wireless and data services, although product sales are playing a huge role.

T-Mobile was responsible for the first release of a high-speed data network in the USA and a number of other countries such as the UK, Hungary and Czech Republic. This caused the company to become a force to reckon with in terms of the quality and innovation enhancements it provides. The firm has been known for aggressive pricing within the mobile wireless telecommunications service industry.

It has done this by spearheading several unlimited service plans within the sector. The organisation has also been at the forefront of providing wireless email to BlackBerry users. Android operating systems can also be attributed to this very same organisation. In a competitive market such as the USA, T-Mobile has won awards for best customer care in the wireless industry for two years, that is; in 2010 and 2011.

This has implications on the level of customer satisfaction, which is a strong competitive factor. In the US, the company has an underdog status. Some of its innovations rarely get the publicity they deserve because of this. Many consumers in this market tend to migrate from other service providers because they are attracted to T-Mobile USA’s low calling plans. However, the product range found in most T-Mobile markets is not as diverse as it is in other competing firms like AT&T.

The firm is strongest in the UK and US owing to its full subsidiaries there. In Czech Republic, the organisation has about 5.273 million consumers. The company is also strong in Macedonia since it has ninety-eight percent coverage of the entire population. In Netherlands, T-Mobile is the second largest mobile service provider. Other countries such as Croatia and Austria have not offered such a huge market for T-Mobile services.

In Montenegro, only thirty-four percent of the population utilises T-Mobile services; they are mostly located along coastal areas and cities. Nations such as Hungary and Germany are technically not T-Mobile markets after the organisations merged with other mobile competitors in those nations. T-Mobile is not the number one wireless service provider in US markets; in Europe, Duetsche telecom is recognised as the largest telecommunications operator in the wireless and wire line sectors.

This can be demonstrated by its high revenue levels in these areas. In fact, in the United States mobile wireless industry, the organisation is ranked fourth in terms of size. However, the organisation gains a competitive advantage through innovations. Most of its competitors have scale advantages that T-Mobile cannot offer to its consumers.

As a result, the firm has worked around this fact by being a value challenger. It has always striven to push the industry barriers by dwelling on the customer. This company has been identified as an important value competitor in several mobile industries around the world. In the United Kingdom, the organisation is owned by ‘Everything Everywhere’, which has and operates the country’s largest mobile network. Therefore, its impact in the UK is much greater than it is in the US.

New developments

Currently, T-Mobile is in the process of completing a merger with AT&T in the US market. It cost the acquiring company a whooping 39 billion dollars to finalise the deal. This agreement has received a lot of media attention owing to the implications of the move. Many senators and consumer watchdogs have asserted that the strategy will create less competition and will cause consumer prices to increase.

On the other hand, AT&T, which is the acquiring company, will benefit from greater coverage as many consumers have complained about its cell phone coverage and the number of dropped calls that occur in their network. The firm will virtually cease to exist, save for its 8% stock ownership in AT&T. The employees and retail outlets that were spread across the US will be released. This can have adverse effects on the economy because all the advertisement investments and wage payments made by T-Mobile will no longer exist (Sorkin et al. 19).

The current proposed merger between AT&T and T-Mobile has been called ‘anticompetitive’ by the US Department of Justice. The country has four wireless service providers; therefore, elimination of one player can strongly undermine the competitive landscape in this industry. Furthermore, it is unlikely that a new mobile service provider cannot fill T-Mobile’s shoes in the required time (US Justice Department 8).

A lot of resources will be used by the new competitor in the US market. It will be quite difficult for that organisation to construct a network as expansive as T-Mobile’s. Consequently, competition will be dramatically undermined in this country. If these arguments are considered seriously, the merger between AT&T and T-Mobile may not take place.

The US Justice Department affirms that although the transaction will create a number of efficiencies, those benefits will be outweighed by the negative effects on consumers and the competitive climate.

The company is also facing challenges with its capacity in some parts of the world like The Netherlands. Since 2010, the organisation has been coping with challenges in the Dutch market. Most of their problems stemmed from the provision of smartphones.

The firm was not in a position to cope with the demand for iPhones from consumers. Several overloads were recorded in Utrecht, Amsterdam and other densely populated areas in that country. People were not able to send SMSs or receive calls when service outages occurred. T-Mobile has invested millions of Euros in a network upgrade.

It is expected that the upgrade will be completed by the end of the year, so that overloads may be reduced. These network coverage issues are also prevalent in the US. The company has rather limited coverage in some parts of the country. Some customers complain about dropped calls as well as call diversions to voicemail. Another challenge lies in the UK. The organisation is dealing with fair-use issues.

In February 2011, the firm reduced its internet-use capacities to 500MB from 3GB. This was done in order to minimise use of streaming and downloading services from consumers; it introduced fair use through static website viewing. Many consumers could no longer chat, watch video clips, or download materials after instatement of this limit.

Given the current popularity of smartphones and online services, it can be asserted that the company has taken a step back in service provision. T-Mobile UK must contend with dwindling consumer satisfaction in this particular market. In the US, complaints have been lodged against the level of internet service quality. These are all issues that need to be rectified in the future.

Proposed and projected outcomes (The future)

The proposed merger that T-Mobile is working on was not just done for the fun of it. The German parent (Duetsche Telekom) decided that it was not economical to keep investing dollars in network upgrades for T-Mobile USA when growth prospects were quite low (Dubro 5).

Duetsche Telekom was exhausted with the excessive investments required in the US markets, so the merger was a way of offloading these problems to another party. As a result, if the merger does not occur, the company will be in total disarray. Many customers have been migrating to other mobile service providers after the merger announcement.

They have not just been doing this because of fear of change. A number of them are dissatisfied with the lack of data coverage for their smartphones, so they are going to competitors for fulfilment of this need. If the merger does not go through then the firm will need to be aggressive about its network upgrades. Currently, the firm’s board members have asserted that they are not ready for a failed merger as no back-up plans have been made (Gruenwald 2). There is a possibility that the merger may be reversed.

If that occurs, the organisation will really need to consider investing in network coverage. Expansions of its 3G networks in the USA have been particularly slow. It may also need to look for other cost-cutting measures such as wage-bill reductions, by either scaling down on the number of workers in the firm or by minimising their individual earnings. Data improvements will need to be done in the UK too. T-Mobile customer satisfaction ratings are reducing because of its data service limitations.

It needs to change this trend in the future. Part of the reason why the company has not been able to achieve this was because it did not have its own spectrum. The firm’s spectrum holdings do not allow it to enact a long term evolution so a new approach will be needed if the merger fails. In fact, since the spectrum issue is so important, the firm will really need to look for another partner in order to get out of its predicament. If AT&T cannot be allowed to engage in this partnership, then Sprint may be a plausible option.

T-Mobile is still regarded as a good company to own by other mobile operators, so this arrangement is not too far-fetched. The main reason why the US Justice Department was opposed to the AT&T/ T-Mobile deal was its effect on competition. Such an argument may not be so powerful if T-Mobile partners with a smaller wireless provider in the US market.

Since T-mobile will dissolve into AT&T, the company will need to prepare its consumers for a transition into the new organisation. Currently, the company has announced that it has already created compatible phones, which will facilitate a switch to AT&T (Wimberley 13).

The company is also working on a number of other mobile products that will be introduced in the near future. Examples include T-Mobile myTouch, T-Mobile myTouch, LG Doubleplay, HTC, radar, T-Mobile springboard and the RIM Blackberry Torch 9860. Some of these products will be part of the new portfolio that AT&T will launch after completion of the merger.

Conclusion

T-Mobile’s future in the USA does not look very promising either in the short-term or long-term. The organisation needs to focus on the UK market by growing its wireless network and by elimination of glitches in its data networks. The company should avoid getting too comfortable in international markets, because mergers can occur to derail its market position.

AT&T

Introduction

AT&T is a US-based firm that was founded in 1983. It is a telecommunications company that offers mobile services, fixed-line internet and broadband services, digital television services, and fixed-line telephone services. Its headquarters are found in Dallas Texas, and has approximately 294,600 employees under its wing.

Company history

AT&T is regarded as a communications service provider. In fact, it is ranked as the fourteenth largest organisation in the world on the basis of its revenue. The firm is the second largest mobile wireless service provider in the US. The company had a number of subsidiaries that included Southwestern Bell mobile systems (this was responsible for mobile services), Southwestern Bell publications and Southwestern Bell Telecommunictions. It later acquired 2 cable companies in 1993.

In 1997, it left the cable company business to focus on its core service – telephone services. Its subsidiary SBC bought Ameritech in 1999, and caused the organisation to record about 46 billion dollars worth of revenue. In 2005, SBC stopped doing business under a different name, and was later absorbed into AT&T. Bell South was bought into AT&T, thus bringing together all wireless services that were offered by that organisation.

In 2007-2008, the firm kept acquiring a number of firms that led to its transition to new media. It bought Edge wireless, which was a GSM carrier. The company needed to expand its spectrum, so it bought Aloha Partners. It was affected by the economic downturn and dismissed 12,000 employees. It bought Centennial, Wayport and Qualcomm.

Impacts

Currently the firm covers about 98.6 million connections in its wireless network. The organisation’s revenues were approximately $124 billion in 2010. The percentage that was attributed to wireless communication services was 43.2%.

These revenues have increased by 2 billion dollars from the previous year. Consequently, the company is doing well. The increases in revenue can be explained by the firm’s success in the wireless data sector, increases in broadband connections, growth in wireless areas, and an increase in U-verse television subscribers (AT&T 12).

The major reason behind this organisation’s success is its wide reach. Approximately eighty percent of the population is covered by AT&T. The number may increase to 93% if the merger with T-Mobile is completed. The company had the exclusive rights to sell wireless services through the iPhone and iPad.

This meant that a wide number of consumers started with them when they joined the smart phone market. Such a formula has worked well for the organisation even in the past. Its strategy has always been to offer universal service to consumers. AT&T has therefore gained control of the US market and then used these economies of scale to become competitive.

The organisation’s approach can be proven by the high number of acquisitions that have occurred in the 1990s and 2000s. Furthermore, because the company has been in existence for so long, it knows how to work its way around communications regulators in the wireless and data service industries. It also employs aggressive marketing in order to attract customers to its network.

New developments

The company is participating in a 39 billion buyout of T-mobile USA. This move will provide the company with very many benefits. First, it will save a lot of money involved in operational expenses used for expansion. It will not have to invest in infrastructural structures that cover areas where T-Mobile had been.

Furthermore, the company will increase its product portfolio. Several devices were available in T-Mobile, but were unavailable at AT&T. It can also offer customers better coverage by sealing some of its service loopholes through T-Mobile’s former network. These two companies both have GSM technologies, so they are likely to merge products effectively. It will probably catapult to become one of the strongest wireless service providers in the United States.

AT&T has been struggling with its low performance in the network coverage sector for some time (CNN Money 2). Many customers often complain about poor service reach and dropped calls. At some point in 2007, the company was categorised as the worst wireless provider in the US.

Many clients claimed that the organisation has not been investing in its network hence its congestion issues. In fact, when compared to other competitors such as Verizon, AT&T has a larger spectrum, yet Verizon has better network quality. The organisation has tried to offset these network issues through certain short-term measures. It changed its calling plans so as to minimise the congestion. Now rates are based on use, so that network overload pressures can be minimised.

Issues of information security have also been at the forefront of this company’s problems. In 2010, the company’s system was hacked by a group known as Goatse security, which found 114,000 email addresses and other sensitive information from AT&T. This revelation was publicised, and it tarnished the company brand. Other parties have also criticised the organisation for assisting the government to tap into consumers’ calls. Privacy concerns have been cited as one of the reasons why customers are not satisfied with the firm’s offerings.

Proposed and projected outcomes

In the USA, T-Mobile entered into a contract with its consumers to provide them with certain calling plans for a set period of time. It is likely that once these contracts expire, AT&T will increase their prices. Consumers are likely to get better services because T-Mobile’s and AT&T services can be merged smoothly to provide them with better network coverage.

Migration of consumers to Verizon wireless for iPhones will no longer be a major issue because traditional AT&T customers will get some of these products from T-Mobile’s former portfolio. Since the subscriber base is likely to go up, then quality in broadband services is likely to improve too. In the long term, it is likely that rural communities will get access to these services in larger numbers.

Due to opposition from the US Department of Justice and other stakeholders in the communications industry, there is a slight chance that the merger may not take place. If this is true, then AT&T will definitely have difficulties in coping with the network issues in its operations. Growth levels have not been that high in the wireless sector. If the merger does not take place, then the company will miss out on a much-needed injection of subscribers (Dealbook 4).

The company could decide to take advantage of the corporate sector. Nowadays, companies are looking to provide their workers with wireless devices. AT&T could take advantage of this fact by tapping into that market. Owing to its network challenges, AT&T needs the merger just as much as T-mobile. This organisation cannot underestimate the effect of a network expansion without installation of the infrastructures needed to do so.

After the merger, it is likely that the company will still keep looking for other acquisitions. This time, the company may decide to look outside US borders in emerging economies. Countries like India have been suggested as possible targets. There have been plenty of rumours that AT&T is having talks with Reliance Communications in India. However, the company’s managers have strongly denied this.

It has also been asserted that the firm may be thinking about getting to new markets through satellite broadcasting. Many industry stakeholders are speculating about AT&T’s bid to acquire DirecTV. It is not certain what the organisation will do in the end (Fart 9).

In order to solve the network issues, the use of different data plans may not be the only option. The company could explore its text messaging services. Experts agree that text messages are a high margin and high dollar service that can be exploited without leading to further congestion within the network. The firm can look for other carriers that can offer these data services.

In the long term, it is likely that radical changes will take part in AT&T’s business portfolio. Industry stakeholders believe that the dividing line between the television set, the computer, and the internet will be eliminated. This will provide consumers with plenty of choices and greater freedom.

In the end, greater net neutrality will be advocated by consumers and watchdogs alike. However, AT&T is likely to reject this kind of approach, so industry regulators, legislators and other authorities are likely to step in. If internet neutrality is introduced, then service providers like AT&T will not be able to squeeze their consumers as much as they do now; users will simply switch to another entity (Web pro news 6). There is evidence to illustrate that this may occur quite soon.

The line between computers and mobile phones is already blurred. AT&T responded to this issue by minimising peer to peer downloads. In the near future, it is likely that the organisation may block voice-over internet protocols on iPhones. Skype is a strong competitor for AT&T because the company has a similar service television service called U-verse. The future may eliminate the need for contracts and instatement of costly text messages, so AT&T’s business strategies may need to be dramatically revised.

Conclusion

AT&T will have an upper hand if the merger occurs. It will report greater cost efficiencies and better network coverage. However, the long term prospects of the organisation may need to be revised in order to place the consumer at the heart of the company’s innovations.

Works Cited

AT&T. “AT&T reports record 2.8 million wireless net adds, string u-verse sales, continued revenue gains in the fourth quarter.” AT&T. AT&T, 27 Jan. 2011. Web. 18 Oct. 2011.

CNN Money. “AT&T: Top 500 American companies.” CNNMoney.com. CNNMoney, 2011. Web. 18 Oct. 2011.

Dealbook. “Back to the future for AT&T.” New York Times. New York Times, 21 Mar. 2011. Web. 18 Oct. 2011.

Dubro, Alec. Grim future for T-mobile. Speedmatters, 12 Sept. 2011. Web. 18 0ct. 2011.

Fart, Michael. “The future of AT&T: of atrophying flesh and phones.” The Economist.com. The Economist, 10 Jun. 2010. Web. 18 Oct. 2011.

Gruenwald, Juliana. “T-Mobile’s future uncertain, with or without AT&T.” National Journal.com. National Journal, 2 Sept. 2011. Web. 18 Oct. 2011

Sorkin, Andrew, Merced Micheal & Wortham Jenna. “AT&T to Buy T-Mobile USA for $39billion.” New York Times. New York Times, 20 Mar. 2011. Web. 18 Oct. 2011.

US Justice Department. “Justice department files antitrust lawsuit to block AT&T’s acquisition of T-Mobile.” Justice.gov. US Department of Justice, 31 Aug. 2011. Web. 18 Oct. 2011.

Web pro news. “Dumb consumers preferable to dumb pipes.” Webpronews.com. Webpronews, 3 Apr. 2009. Web. 18 Oct. 2011.

Wimberley, Taylor. “It looks like T-Mobile is future proofing their new phones to run on AT&T.” Android and me. Android and me, 22 Mar. 2011. Web. 18 Oct. 2011.

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