The implications of yesterday's blockbuster announcement by AT&T of its intention to buy T-Mobile USA are just beginning to reverberate. While most of the press will be looking at how this changes the dynamics of the mobile space, there are some pretty major implications for a swath of the independent fiber operators. The reason is simple: if this deal goes through, then anyone who lists T-Mobile as one of their top customers for wholesale network services is going to feel pain.
AT&T and T-Mobile both run GSM networks and their consolidation will be rather simpler than, say, Sprint/Nextel. AT&T does most of its own backhaul, while T-Mobile necessarily leases what it needs. Hence, it seems obvious that a big part of the synergies they find will come from moving T-Mobile bits onto the AT&T network wherever it makes sense. It doesn't mean they will lose all those revenues of course, it won't make sense everywhere and in some cases there will be new opportunities. But mathematically, much of those synergies that AT&T will be chasing will come out of the revenues of independent fiber operators, large and small, one way or another.
Who would that be? Well, T-Mobile USA worked with lots of people. A few years ago they announced substantial deals with Zayo, IP Networks, Bright House, and FPL Fibernet. Just last week, Bright House won another such deal in Orlando - which of course is inside AT&T's turf via the Bell South acquisition. It's not limited to fiber-to-the-tower backhaul, but rather for serving those wireless switching centers and regional aggregation loops and such. Level 3 certainly has some exposure, as does TW Telecom albeit probably a bit less. Even CenturyLink/Qwest would surely see headwind from it. During Q1 earnings reports, the potential for churn from this deal will be an unavoidable topic. Operators with less of a presence directly serving wireless carriers probably have less to fear.
Actually, I wonder if this doesn't make it into the FCC and DOJ scrutiny. Whether the wireless sector is healthier with three players or not is an entirely separate question from whether the wireless backhaul segment is. Without an independent T-Mobile USA or a larger independent force (e.g. a Sprint/T-Mobile merger) as a counterweight, what you have in the developing 4G world is two wireless giants with national longhaul/metro footprints who only outsource the jobs they don't want, plus two unestablished challengers (Clearwire, LightSquared) whose viability the market is currently rather doubtful of. It's not a balanced market structure, the big buyers will have disproportionate leverage. We will surely see filings demanding concessions on this front.