Watch CBSN Live

AT&T Is Desperate to Save Its T-Mobile Deal -- and Here's Why

AT&T (T) is in full-blown, run-headlong-into-walls panic mode. To keep its $39 billion takeover of T-Mobile on track, the company has to go hat-in-hand to small rivals, begging them to buy spectrum and subscribers. What AT&T is trying to do is quickly shed reach and size to argue, "Noooo. Monopoly? Are you kidding? Why, with T-Mobile, we'll be lucky to be big enough to get a discount on paper clips."

What's happening is beyond AT&T's desire to crush all competition and again become Ma Bell, though that's a powerful factor. But the company faces an immediate big problem. It's about to lose the hype war in network speed and power because it's terribly behind hated rival Verizon (VZ). That might translate into significant customer defections over time.

Trailing Verizon and needing help
AT&T's true interests surfaced last month, when a letter, accidentally posted by a law firm working for the carrier, showed that it would have cost about a tenth of the T-Mobile purchase price to build out its wireless network.

But what type of 4G? Right now, the technical competition between AT&T and Verizon is the former's HSPA+ versus the latter's LTE. Both are called 4G networks that are supposed to bring fast data speeds, but LTE is supposed to be faster. You can get into technical arguments, but the practical proof is that AT&T is trying to build out its LTE network, but is launching its first five markets, versus Verizon's coverage of more than half of the U.S. Check Verizon's coverage map below (click to enlarge):

The green stars are current LTE 4G coverage and the green dots show what Verizon says will be turned on in 2011.

Here's AT&T's coverage, with the darkest shade of blue showing HSPA+ and orange showing LTE (click to enlarge):

It depends on your definition of 4G
Verizon is out in front and looks like it's about to widen the lead on LTE. But HSPA+ is 4G, so what's the problem? There are different types of HSPA+ that run at different speeds. AT&T mostly has the slower kind, which isn't what you want to tout in a war of words over speeds and feeds. It has the faster type, but in very few markets.

T-Mobile, on the other hand, is much further along in implementing the faster type.

It's more evidence that AT&T's talk of needing the acquisition to expand 4G access for the country is bunk. The only people that see an expansion are the ones working for AT&T's marketing department. If it doesn't pull off this deal, it will take significantly longer to catch up to Verizon even in hype chatter. And, of course, given that AT&T will be out at least a $3 billion deal cancellation fee, losing the bid would be doubly painful.


Image: morgueFile user almogaver, site standard license.
View CBS News In