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AT&T plan to merge networks with T-Mobile faces few technical hurdles

If an AT&T/T-Mobile merger is approved by the FCC, the path to merge networks should face few technical challenges, thanks to a common technology heritage between the two carriers.

No major mobile carrier in the United States has a purebred network. They're all mutts, cross-bred with different cellular technologies, backhaul networks, billing systems and vendor hardware after years of various mergers and acquisitions (M&A).

When wireless carriers merge networks that have little in common -- such as Nextel's iDEN network and Sprint's EV-DO network -- integration can be challenging and drawn out. But the proposed merger between AT&T and T-Mobile USA's wireless networks could be much more painless from a technical perspective -- overcoming the regulatory hurdles will be thornier -- thanks to the common technology heritage between the two carriers. AT&T's wealth of experience with M&As will also come in handy during the network integration process.

This is an optimal combination: It pulls together a highly complementary network asset, the spectrum holdings are compatible and we're on the same global technology path

John Stankey
President and CEO, AT&T Business Solutions

"If there's any [service provider] that's an expert at migrating or integrating other [telecom networks] into their existing technologies, it's AT&T," said Bill Rubino, principal analyst of The Connected Analysis Group, an independent wireless research and consultancy firm based in Orlando. "There will be some challenges and things they're going to have to take a look at to make sure whatever differences [in the network] T-Mobile currently has will be common to what AT&T has ... but [AT&T is] really good at doing this."

AT&T announced its intention to buy T-Mobile from Deutsche Telekom for $39 billion on March 20, the eve of the CTIA Wireless trade show in Orlando. The news silenced rumors that Sprint Nextel Corp. would buy T-Mobile, a deal that reportedly fell apart because Sprint lowballed its offer.

Because both AT&T and T-Mobile based their 2G and 3G networks on the same technologies -- Global System for Mobile communication (GSM)and High Speed Packet Access (HSPA), respectively -- network integration should be relatively easy for AT&T. Sprint, on the other hand, has based its 2G and 3G networks on an incompatible technology path: Code-Division Multiple Access (CDMA).

AT&T/T-Mobile merger should boost network capacity in major metro areas

AT&T, which has been dogged for years by complaints about its poor voice and data coverage, sees those compatibilities as an opportunity to quickly and cost-effectively expand its coverage, said John Stankey, president and CEO of AT&T Business Solutions, on a recent conference call with investors.

The merged network will have 20% to 40% more capacity in many densely-populated metro areas, Stankey said. Acquiring that capacity as opposed to building it out would free AT&T from "extended local permitting processes or disruptions from new site construction," he said. 

If the AT&T/T-Mobile merger were approved by the Federal Communications Commission (FCC), it would give AT&T about 45% of the mobile market share in the United States, according to today's number of subscribers, said Phillip Redman, a research vice president at Gartner Inc. Also, AT&T estimated that the merged network would have the potential to cover 95% of the U.S. population.

AT&T expects to completely merge networks with T-Mobile within two years of closing, Stankey said.

"This is an optimal combination: It pulls together a highly complementary network asset, the spectrum holdings are compatible and we're on the same global technology path," Stankey said. "The common technology base that represents the starting point of these two independent companies means these benefits come faster and larger than they might with any other U.S.-based combination."

Plan to merge networks with T-Mobile easier, but 'not simple'

Although AT&T and T-Mobile's shared technology heritage will make it easier to merge networks, an integration of this scale would be by no means simple, Redman said.

"You can look at [AT&T's past mergers with] Centennial [Communications] and Dobson [Communications], but they're not the same size as what a T-Mobile network will be," he said. "It's not going to be simple, but I think they've certainly been through this before when they [merged with] Cingular and also had [to integrate] the Bellsouth side and SBC [Communications] side."

Because of the carriers' shared technology base, AT&T's plan to merge networks with T-Mobile's network will be more of a checklist than a challenge, Redman said.

Integration points will include operational support systems (OSS), billing support systems (BSS), telecom network monitoring tools, short messaging systems (SMS), gateway configurations, different versions of vendor software on their infrastructures, end user device compatibility and any customized systems each carrier has developed, Redman said.

However, integrating and upgrading the wireless backhaul network that AT&T inherits from T-Mobile will require a broad strategy, Rubino said.

"There may be differences in what T-Mobile's bandwidth can handle and what AT&T's bandwidth can handle, and they're going to have to bring that up to the highest level," Rubino said. "They're going to have to look at physically and logically upgrading some of these areas to optimize the scalability, reliability and overall cost."

For now, AT&T has mostly detailed its plans for merging the two carriers' radio access networks (RANs). The immediate first steps would be choosing which of T-Mobile's cell sites it will retain, dual-banding those networks and opening roaming on both so that subscribers can use both, Stankey said. He did not specify how AT&T will select the sites or whether the process will be done via software upgrades or truck rolls.

 As part of that process, AT&T would also reconfigure its Wi-Fi network to allow access to former T-Mobile subscribers, Stankey said.

In the merger's second phase, AT&T will consolidate and reappropriate the two carriers' spectrum, which would add T-Mobile's space in the 1900 MHz and AWS 1700/2100 MHz bands, pending FCC approval. 

"We'll consolidate T-Mobile's UMTS capacity to the 1900 MHz band by taking advantage of traffic efficiencies gained by putting the two networks together," Stankey told investors. "This will free up T-Mobile's AWS spectrum for LTE implementation. Our third step will be to harmonize the two networks and spectrum deployments to bring LTE to more Americans in more places."

Beyond AT&T's objectives with the RAN, Stankey offered few other technical details about the planned merger. However, he said AT&T would "eliminate geographically-redundant operations and administration, rationalize support infrastructure, improve our lifecycle costs and scale key areas in our supply chain ... improve working capital performance through inventory consolidation, reduce operating costs for billing and remittance operations, leverage extensive network automation and ... lower roaming and third-party transport payments." 

Let us know what you think about the story; email: Jessica Scarpati, News Writer.

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