What Does AT&T Dropping T-Mobile Deal Mean for Customers?

For AT&T customers, nothing will change immediately. But in the coming years, AT&T--like just about every other carrier--will need to find a way to get access to more airwave frequencies to make sure it can support the surge of data traffic on its network. That was a problem the T-Mobile deal was supposed to solve. If AT&T isn't able to find another solution, higher prices and worse service quality could result. For now, AT&T is likely to continue to manage customers' data use by charging heavy users more. AT&T will also look to improve network performance in heavy-usage markets like New York and Chicago by installing more antennas and building better connections between the antennas and the network's core. And while AT&T will need to pay T-Mobile's parent $3 billion in cash and $1 billion in spectrum assets to make up for the deal falling through, that won't be much of a hit to the company's books. AT&T reported $94 billion in revenue for the first nine months of 2011.

For T-Mobile customers, there’s a lot of uncertainty swirling around T-Mobile--most of all because its owner, Deutsche Telekom AG of Germany, has said it wants to exit the U.S. market. For now, expect T-Mobile to continue to compete strongly for value-conscious customers. The company is able to offer relatively cheap smartphone rate plans, and it's also been making a push to gain more customers who don't want to sign up for a two-year contract. But in the longer term, T-Mobile faces serious challenges. The uncertainty of the AT&T deal left the company in limbo for nearly a year--a very long time in the fast-changing telecom industry. T-Mobile is now the only national carrier without the iPhone. And it doesn't have a plan in place to upgrade its network to the fourth-generation standard already being adopted at Verizon Wireless, AT&T, and Sprint Nextel Corp. To do that, T-Mobile will need an investment that Deutsche Telekom so far hasn't been willing to make.

For customers of other carriers, expect the wireless industry to remain in flux.