Bernstein Research: AT&T–T-Mobile Deal as Good as Dead

Collapse could benefit cable and other pay-TV providers, says top analyst

By John Eggerton -- Broadcasting & Cable, 8/31/2011 4:01:30 PM

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Craig Moffett, senior analyst with Bernstein Research, says that the double hit of DOJ's suit against the AT&T–T-Mobile merger and the FCC's signal that it too has issues with the deal's impact on competition, means the proposed $39 billion combo of two of the top four wireless carriers is "all but definitively dead."

But that could wind up up being good news for cable.

In an advisory issued in the wake of Justice's antitrust suit against the deal, Moffett said that the news would wind up being bad for "all" carriers, not just AT&T. While Sprint was one of the deals strongest opponents, Moffett says it could be one of the biggest losers in that DOJ would appear to foreclose any potential Sprint–T-Mobile meld as well.

Generally, he says, pricing is likely to be "less stable," which was the government's goal in preserving a price competitor to the larger carriers.

"Sprint now regains a competitor (T-Mobile) forced to re-energize its competitiveness in Sprint's core middle market," said Moffett. "Sprint also potentially loses support of the Cable MSOs, who have been rumored partners for Sprint's 4G strategy but who now may have a better option in T-Mobile USA.

"Perhaps the only real winners here are the pay-TV providers," says Moffett. "For Comcast and TWC, this significantly reduces the near term risk of a good-money-after-bad investment in Clearwire and/or Sprint," he writes. Moreover, he says, T-Mobile and parent Deutsche Telekom now become a potential buyer for cable mobile backhaul services.

He also says Dish would be a big winner since it would leave T-Mobile free to partner on a wireless strategy with the satellite operator, which has spectrum and an eye on the wireless phone market.