“Higher prices, few choices, less innovation.”
Not a good combination in anyone’s book. But that’s exactly how consumer rights group Public Knowledge described AT&T’s (NYSE: T) proposed $39 billion buyout of T-Mobile USA from Deutsche Telekom (PINK: DTLSF).
Because once finalized, the addition of T-Mobile’s 33.7 million subscribers would give AT&T a total of 129.2 million, allowing it to dethrone Verizon (NYSE: VZ) as the top mobile carrier in the United States. It would also give AT&T access to T-Mobile’s 4G network, which would save AT&T five years of expanding its mobile spectrum.
And ultimately, as I mentioned in my article on AT&T and T-Mobile, the acquisition creates a losing scenario for consumers.
Needless to say, such a powerful merger has brought the FCC and antitrust folks out in force. The acquisition faces strong opposition and analysts doubt it will pass the FCC unscathed.
That’s not stopping Wall Street from placing bets on AT&T, though…
Wall Street Tunes Out the Masses
At the moment, 18 out of 37 analysts covering AT&T rate the stock a “buy” (with zero rating it a “sell”). And JP Morgan (NYSE: JPM) says “upward revisions to Street estimates are likely.”
But this tunnel vision is keeping Wall Street from noticing something else that’s brewing right now: The collective roar of dissent coming from T-Mobile subscribers. A roar that could develop into a crescendo and threaten AT&T’s coveted top spot.
So where exactly do T-Mobile customers stand on the proposed buyout?
T-Mobile Users Have Spoken… And Spoken Loudly
Just check out Gizmodo’s latest survey. They asked current T-Mobile users for their reactions to AT&T’s acquisition.
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The most optimistic option – “No Big Deal” – got the lowest amount of votes with 12%. No surprise there, given that it’s a divisive issue.
An overwhelming majority of voters – 75% – fell in the generally disgruntled categories. And while only 13% said they’d abandon ship immediately, I’m convinced that if a deal with AT&T goes through, it would push the rest over the edge.
Freedom-Loving T-Mobile Subscribers Don’t Want AT&T’s Iron Grip or Patchy Service
As a longtime T-Mobile subscriber, I can personally say that we enjoy more freedom than other carrier’s customers, hands-down. And simply put, freedom doesn’t mesh with AT&T.
- T-Mobile offers the cheapest monthly rates in the nation, while AT&T’s are some of the highest.
- T-Mobile’s smartphone plans offer unlimited data, while AT&T charges for data based on a tiered system.
- Some T-Mobile plans don’t involve a contract, meaning you can switch carriers whenever you want – no questions asked. To leave an AT&T smartphone contract early, you’d have to cough up $325.
- Thanks in part to a constantly expanding network, T-Mobile tied for the lead in the American Customer Satisfaction Index survey last May.
On the flip side, AT&T never expanded its network properly. And its infamously terrible service put the carrier in dead last in a Consumer Reports survey in December.
But with no competitors selling the iPhone at the time, AT&T had zero incentive to upgrade its network. So the 73.5 million iPhone users that joined AT&T by the fourth quarter 2010 just had to deal with the patchy service and dropped calls.
I guarantee that T-Mobile subscribers won’t stand for such “gotcha” treatment. And if the merger with AT&T gets the green light from the FCC, I expect the majority of them to jump ship before getting locked in, thereby derailing AT&T’s drive to become the top U.S. carrier.
But where will subscribers go instead?
The Best Choice for Value-Driven T-Mobile Customers
As I said on Tuesday, “The carrier that offers the most competitive pricing and attractive phones will win in the end.”
And I mentioned that without T-Mobile, Sprint (NYSE: S) is the best contender here.
In addition to the fact that Sprint was already preparing to strike a deal with Deutsche Telekom, value-conscious T-Mobile customers should enjoy Sprint’s competitive rates. And once Verizon switches to tiered data this summer, it will make Sprint the only carrier with unlimited data plans.
Bottom line: Sprint is a natural fit for T-Mobile customers looking to get out of AT&T and is definitely worth a spot on your watchlist. The fact that Sprint shares are down 8.5% since March 17 simply means that Wall Street is blind to the potential here. I can’t say I’m surprised.