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AT&T claims synergy with T-Mobile, but history casts doubt

AT&T claims synergy with T-Mobile, but history casts doubt
AT&T's proposed acquisition of T-Mobile has been met with serious skepticism, and even anger from T-Mobile customers. But despite AT&T's best efforts to paint a picture of perfect harmony between the two carriers, most people, including regulatory bodies, remain skeptical.

AT&T is now promising that the 'synergy' created by the acquisition would offset the $39 billion purchase price. "But how?," you might ask. AT&T says that the synergy will increase smartphone penetration and data ARPU (average revenue per user), while saving money from the network overlap, reduced churn (a.k.a. customer turnover), and spectrum purchases.

But even though AT&T has claimed a "run rate of $3 billion three years after closing onward," experts are quick to point out AT&T's broken promises of the past. AT&T's acquisition of Bell South in 2006 promised run rates of $2 billion by 2008 and $3 billion by 2010, thanks to diminished staffing and advertising costs.

But their margin of earnings before interest, taxes, depreciation, and amortization ("Ebitda"), only grew from 34.5% in 2006 to 34.6% in 2008. And profits were barely increased. So is AT&T just blowing smoke with their promises of synergy with T-Mobile? Maybe not. For one thing, they need the spectrum. And for another, their savings from advertising, staffing, etc. will be significant. But even if they can produce a more powerful, affordable network for both sets of subscribers, it still might constitute a dangerous monopoly.

source: Wall Street Journal via FierceWireless


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