I wish to thank the good folks at AT&T, T-Mobile (News - Alert) USA and Deutche Telekom (DT) for embarking on what may or may not turn out to be their “excellent adventure.” This is a story that makes the twists and turns of most spy novels seem mundane.  This past weekend saw two new storylines develop that are worthy of note, following on the heels of last week’s move by the U.S. Department of Justice (DOJ) to block the deal. So, what’s new?

• The Internet is abuzz with a report by Reuters quoting an anonymous source that if the deal does not go through, AT&T may be off the hook for the $3 billion in breakup fees and estimated $4 billion in spectrum and network sharing obligation it looked like it would incur.
• The widely reviewed footnote in the leaked AT&T letter of August 8 from AT&T’s attorneys to the Federal Communications Commission (FCC (News - Alert)), hosted by DSL Reports, says AT&T with the addition of T-Mobile would have 93.7 percent of the U.S. covered with LTE service within six years of the deal closing.

 Credit where credit is due

First, T-Mobile USA owner DT must feel like the famous quote in William Shakespeare’s play Henry VI where in Act IV, Scene II, King Henry says, “The first thing we do, let's kill all the lawyers." Apparently the AT&T legal team was smart enough to include language that says the fee only gets paid if the deal gets approved within a certain amount of time and if T-Mobile's value doesn't drop below a certain level.  

Time may, in fact, run out, and T-Mobile’s value decreases every day because of the uncertainty about its future. As my colleague, TMCnet Contributing Editor Gary Kim (News - Alert), points out in a fine analysis today, this is likely to leave DT lot poorer going forward. This is true whether they hang onto the asset with its shrinking customer base and no clear path to being able to compete as 4G LTE investments would dictate, or they unload it in a fire-sale to a “white knight” like Sprint Nextel or a cable company.  Give credit where it is due: to the AT&T legal team. 

4G LTE coverage remains an interesting challenge

AT&T is behind Verizon (News - Alert) in deploying 4G LTE, and the admission in its letter to the FCC that even with the merger it would take six years to cover 93.7 percent of the combined footprint area should be viewed as unsettling on two fronts:

• Why are they so far behind?
• Wouldn’t spending the T-Mobile money on accelerating 4G LTE be a better bet?

The facts is, the AT&T (formerly AT&T Wireless before SouthWestern Bell took over and adopted the AT&T brand name) has suffered for years in terms of technology used and service performance. Indeed, AT&T saying that it expects to cover 97 percent of the population in its footprint with 21Mbit/s HSPA+3G is an indication of how much catch-up it has had to play. The letter only amplifies how far it has to go. It also seems to answer the second question about where to spend money — a little under $4 billon is the estimate for building out a 4G LTE national network and not a bad place to start.

Putting the cart before the horse

While all of this is exciting to write about, and makes one anxious to see what will happen next in the short term, what seems to have gone under-analyzed in all of this is the impact of the Apple and Android ecosystems on all of this. The history of the mobile industry in the U.S. has been that my choice of carrier tended to dictate my choice of phone. However, as a result of Apple iPhones and iPads and the emergence of Android smartphones and tablets, it is now the other way around.

It can reasonably argued based on adoption rates of new devices that if you are a mobile services provider and that little icon showing what network someone is on does not read “4G” in the next few months, your market share is in jeopardy. Let’s face it, from a customer experience perspective, it would be nice to try and persuade customers that 21Mbit/s HSPA+3G is just as good as 4G, but I would not want to be the marketing person assigned that task.

Lost in all of the machinations about industry restructuring is a simple reality, customers are likely going to drive the market not service providers. And, what is going to drive them is who gives them the best customer experience (speeds, feeds, prices, performance, etc.) to their ecosystem of preference.  Viewed in that light, we may look back in a few months and say AT&T “doth protest too much.” 

BREAKING NEWS:  Sprint Nextel has just announced that today (September 6, 2011) that it brought suit against AT&T, Inc., AT&T Mobility, Deutsche Telekom and T-Mobile seeking to block the proposed acquisition as a violation of Section 7 of the Clayton Act. The lawsuit was filed in federal court in the District of Columbia as a related case to the Department of Justice’s (DOJ) suit against the proposed acquisition.

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