AT&T/T-Mobile merger scrambles long-term handset picture

AT&T's (NYSE:T) proposal to buy T-Mobile USA for $39 billion is reverberating across the wireless world, and the one sector that may be affected the most is the handset industry. 

Though there are currently more questions than answers, analysts agreed that if the transaction is approved handset makers will have to adjust to the reality of dealing with a wireless behemoth with nearly 130 million subscribers--a carrier that would weild incredible buying power.

Interestingly, AT&T executives made clear that there will be major shifts in how handsets interact with the combined network.

AT&T CTO John Stankey said on a conference call that, over the course of several years, AT&T will move customers off of T-Mobile's UMTS service, which currently runs on its 1700 MHz AWS spectrum, and onto AT&T's 1900 MHz spectrum. AT&T will then run its LTE service over its 700 MHz spectrum and over AWS spectrum. In other words, T-Mobile customers with 3G handsets will eventually have to purchase new devices that work with AT&T's frequencies.

Representatives from various handset makers generally said that they have built up strong relationships with both carriers and that they expect to maintain those relationships. Analysts were more divided though over the long-term ramifications for the handset industry.

"There will be wider handset choice at AT&T as the carrier picks up some of T-Mobile's line, but likely less choice overall--i.e., it is hard to imagine AT&T offering every phone it does today plus every device from T-Mobile's shelves," Current Analysis analyst Avi Greengart said.

Greengart said HTC could benefit, since HTC sells a lot of smartphones at both AT&T and T-Mobile, "but AT&T lets the vendor use and promote its own brand while T-Mobile uses HTC more as an ODM for its carrier-branded phones." He said Sony Ericsson and LG are stronger at AT&T than at T-Mobile and could benefit as well, though LG may lose out in tablets. However, he said, for most other vendors, the transition to AT&T from T-Mobile will not dramatically shift the competitive balance.

The deal also likely will bring Apple's (NASDAQ:AAPL) iPhone to T-Mobile customers, though Greengart noted that they will have to adopt AT&T's more expensive pricing plans. (In a FAQ on the transaction, T-Mobile warned its subscribers that it won't be able to offer the iPhone until the transaction is approved by regulators.)

Tim Bajarin, an analyst at Creative Strategies, said he thinks the deal "should allow [AT&T] to carry more models and push for more innovation that in the end gives their customers more choices." Other analysts echoed that position.

"In the short term, AT&T becomes the only major GSM/HSPA+ carrier in the U.S," said Ross Rubin, an NPD Group analyst. "The combined entity might not pursue HSPA+ rollout as aggressively as T-Mobile was now that there is a clearer path to LTE. T-Mobile had been hamstrung in the past by handset selection due to its AWS spectrum. Presumably the massive combined subscriber base would allow AT&T to drive more handsets that supported it. Long term, with both AT&T and Verizon on LTE along with major European carriers, a more common network standard could accelerate handset development across the two largest carriers."

Complete Fierce coverage of AT&T/T-Mobile:
--AT&T to buy T-Mobile USA for $39B
--Will regulators approve the AT&T/T-Mobile USA deal?
--What happens to Sprint, Clearwire and LightSquared? AT&T + T-Mobile USA ramifications
--Is acquiring T-Mobile USA the answer to AT&T's data demands?
--AT&T, T-Mobile USA merger as much about HSPA as it is about LTE
--After AT&T deal, Deutsche Telekom to refocus on Europe

For more:
- see this AP article
- see this GigaOM post
- see this CNet article

Related Articles:
What happens to Sprint, Clearwire and LightSquared? AT&T + T-Mobile USA ramifications
AT&T to buy T-Mobile USA for $39B
AT&T completes BellSouth acquisition, kills Cingular
Verizon's Alltel acquisition: What are the ramifications?

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