AT&T: T-Mobile deal would produce a bigger, better operator ultimately benefiting consumers

With an eye toward the regulatory powers that be, AT&T (NYSE:T) today made the hard sell for its proposed $39 billion acquisition of T-Mobile USA from Deutsche Telekom (NYSE:DT), presenting a string of executives during a media and analyst webcast to make AT&T’s strategic and competitive case for creating a new mega-carrier.

AT&T officials stressed that rather than produce less competition in the market, a combined T-Mobile-AT&T (CP: AT&T buys T-Mobile in blockbuster wireless deal) would create a more competitive landscape in the U.S. wireless industry by achieving greater economies of scale that would drive down data prices, expose more Americans to mobile broadband and foster more service innovation.

AT&T’s biggest selling point was the expanded scale of its future mobile broadband network if it combined network assets and licenses with T-Mobile. An AT&T of 130 million subscribers loaded down with new spectrum could build a long-term evolution network covering 95% of the U.S. population, adding 46 million pops, mainly in small and rural markets, to the largely metropolitan network it plans to build today. AT&T gave no timeline on when such a network would be complete, but considering AT&T expects to close the deal in a year and estimated another two years to fully rationalize the two operators spectrum holdings, the operator is looking at a 3-year horizon at the minimum.

“This is a major investment and commitment by a U.S. company to advance U.S. leadership in mobile broadband,” AT&T CEO Randall Stephenson said. “We’ll reach 95% of the U.S. population. That’s more than either company would achieve on its own.”

AT&T Consumer and Mobility CEO Ralph de la Vega, General Counsel Wayne Watts, CEO of AT&T Business John Stankey and Chief Financial Officer Rick Lindner, however, ticked off many more reasons why the merger of assets would produce an estimated $40 billion-plus in cost synergies. Some of the most salient points were:

- A greater variety of devices – T-Mobile and AT&T would create one of the single largest portfolios of smartphones and tablets in the industry, combining the Apple (NASDAQ:AAPL) iPhone and Research in Motion (NASDAQ:RIMM) BlackBerry might with T-Mobile’s Google (NASDAQ:GOOG)-dominated catalog and supplemented by Microsoft (NASDAQ:MSFT) Windows Phone 7 devices.

- Greater network density – While AT&T wouldn’t keep every cell site of the combined operator online, it could achieve a 20% to 40% increase in cellular density in most markets by incorporating T-Mobile’s sites into its footprint, according to Stankey. That would allow AT&T to offer better urban and rural coverage and reduce the number of dead-spots in its network. In the case of the considerable number sites that AT&T and T-Mobile share, their combined infrastructure would greatly boost capacity available in the cell, supporting more customers with faster connection speeds.

- Delays the need to find more spectrum – Combining the two companies license holdings would create a spectrum portfolio that could produce a robust 3G and LTE network without going to the market for more licenses. T-Mobile has no definitive plans to deploy LTE without harvesting its current GSM spectrum, while AT&T’s planned LTE network would be a bit spotty in terms of coverage outside of the major cities. By combining T-Mobile’s Advanced Wireless Service (AWS) spectrum—which it is currently using for high-speed packet access plus (HSPA+)—with AT&T’s own AWS holdings, AT&T could create an uninterrupted LTE network with 40 MHz of contiguous bandwidth in most markets, exceeding that of its biggest competitor Verizon Wireless (NYSE:VZ, NYSE:VOD) and augmented by the LTE network at 700 MHz it plans to build in major markets. AT&T would first have to migrate T-Mobile’s HSPA+ network down to the PCS band, where spectrum would come available through the merging of AT&T and T-Mobile’s GSM voice networks.