AT&T, T-Mobile network sharing could be the ticket to pass regulatory muster

editor's corner

AT&T (NYSE:T), facing opposition from both the Department of Justice and the FCC over its plan to purchase T-Mobile USA, and T-Mobile USA parent Deutsche Telekom are reportedly studying a move to create a network-sharing joint venture in event the $39 billion deal falls apart, according to a report in The Wall Street Journal.

While not ideal for the companies, it might be their best bet to gain some economies of scale without facing opposition from government regulators that are concerned about competition and consumer choice. A deal would alleviate the spectrum crunch the two are likely to face in the next several years, while allowing the operators to market their own services to consumers.

Fortunately for the two companies, network sharing is becoming common practice in other countries, primarily in Europe where coverage requirements are stricter-especially in rural areas. This week Telefónica Germany confirmed that talks are underway with two other mobile operators to share network infrastructure.

AT&T and T-Mobile have to determine what sort of network sharing they are going to incorporate. Will it include cell site sharing, backhaul link sharing or deeper radio access network equipment and frequency sharing? The deeper the integration, the more complicated the deal gets. The trick is make sure both parties agree on network rollout, funding and implementing features such a network traffic management.

Such a move could also give a greater foothold to managed network services in a market that has been largely resistant to them. Ericsson manages Sprint Nextel's network, and the operator has credited the vendor with its ability to manage the mobile data onslaught.

If AT&T and T-Mobile execute a partnership right, they could become a competitive force that might push the re-architecture of competitive networks. --Lynnette

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