While the carrier gets valuable spectrum, a roaming agreement and $3 billion in cash, the future of the No. 4 U.S. carrier is cloudier than ever, now that AT&T has called off its planned purchase.

T-Mobile has been operating as something of a lame duck since AT&T first proposed its $39 billion acquisition in March. Consumers, employees and potential partners have all been writing the carrier off, assuming that it would soon be swallowed up by its far-larger rival.

The abrupt turn of events will send T-Mobile and its parent company back to the drawing board, which will include soliciting new buyers, figuring out a strategy for its next-generation network and coming up with some inducements to avoid losing even more customers.

The blow of the breakup is only softened by the fact that the Bellevue, Wash.-based carrier will be handed a huge chunk of spending money to ride out the near-term bumps.

As T-Mobile looks to come up with Plan B, here are some potential options:

Spectrum sharing: As part of the breakup, AT&T has entered a mutually beneficial roaming agreement with Deutsche Telekom. Terms of the agreement have not yet been shared, but there could be some pretty compelling outcomes.

In Europe, it is common for carriers to share spectrum and even the cost of maintaining the network and towers. From the consumer’s perspective, it’s two different networks and two different brands. The carriers only end up competing on handset offerings, price and features — not coverage.

Another merger: T-Mobile will entertain any and all offers. Most recently, Dish said it was interested in partnering with T-Mobile if its merger with AT&T fell apart. Other candidates could include Sprint, or other companies from the media industry that are always sniffing around wireless, such as cable operators.

A bid from a company like Google or Microsoft would definitely make things interesting. While both are less likely candidates, they could use the network to push their agenda, including handsets and applications.

A total overhaul: The $4 billion breakup fee could give Deutsche Telekom the confidence to take another shot at the U.S. market. Probably not, but there’s always a chance. The company’s roots have been entrepreneurial and scrappy, but it’s been awhile since it has been able to make an impact on the market.

Worst-case scenario: Deutsche Telekom passes out the cash as a dividend to stockholders. It has always leaned on the U.S. as a moneymaker, and this could be no exception.

The 4G conundrum: Regardless, T-Mobile still does not have enough spectrum to update its network to the next generation. It may gain access to AT&T’s 4G network as part of the roaming agreement with AT&T, but both companies will arguably need more spectrum to keep up with demand.

The only two options will be to partner with Clearwire or LightSquared, or to wait until the next government auction. Both Clearwire and LightSquared are always in need of more cash, and have their difficulties. A deal with Clearwire would be additionally complicated by the fact that Sprint owns nearly half of the company.

AllThingsD’s Ina Fried contributed to this report.

The agreement soothes investor fears Sprint was seeking to distance itself from its 4G provider as the carrier planned its own new high-speed network on the LTE technology favored by AT&T Inc. and Verizon Wireless. Sprint will pay $926 million for unlimited use of Clearwire’s WiMax 4G network through 2013, giving Clearwire a needed cash infusion.

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The Kirkland, Wash., company had $698 million in cash and short-term investments on Sept. 30, and can afford to make the $237 million payment due Dec. 1. But it also needs to raise lots of money if it is to remain in business after the next 12 months.

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The news sent the company’s shares soaring by as much as 34 percent. Investors have been concerned about Clearwire’s ability to continue to add customers, as its largest customer and majority shareholder, Sprint Nextel Corp., appears to be distancing itself from the company.

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CNET reports that Sprint is actually more than open to LTE — it’s already testing gear and planning to launch an LTE network early next year. Sprint is scheduled to talk about its network future at an event next week and a representative declined to comment ahead of that.

Sprint has already taken some steps into LTE, including signing a deal with LightSquared, which is looking to build a wholesale LTE network of its own.

Verizon has already launched LTE widely and AT&T has just launched its own LTE network in several markets. T-Mobile has said its long-term future would be LTE, but it currently lacks the spectrum it needs to offer such a network — part of the reason it is hoping its deal to be acquired by AT&T goes through.

While adding LTE would be costly for Sprint, trying to get handset makers to support WiMax with their latest devices could become harder over time as the world centers on a different technology. Many of the signs of such a move are evident, including partner Clearwire saying that it is also looking to support LTE.

In March, the cash-stressed communications company underwent a broad management shake-up during which Bill Morrow resigned as CEO and director for “personal reasons.”

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Back in January, the carrier added a $10 surcharge for nearly all smartphones. The company has also become more restrictive in its loyalty programs, lengthening the amount of time before which most customers are eligible for a fully-subsidized upgrade.

“Any time you increase prices you are not going to get a lot of high fives from the customer base,” Dan Hesse said, speaking at a J.P. Morgan technology conference in Boston. However, he said, the alternatives were things like data caps or throttling customers once they hit a certain usage level.

The company is just starting to see the profit benefit from the move, which is showing up in terms of higher revenue per user. The company should get a full quarter of that benefit in the second quarter. However, Hesse said that the company is also seeing greater competition this quarter as Verizon gets a full quarter with the iPhone and Thunderbolt and AT&T continues its $49 price promotion with the iPhone 3GS.

“It’s a very competitive environment out there,” Hesse said.

Hesse also pointed to a just-announced survey showing Sprint neck and neck with Verizon Wireless at the top of a key customer satisfaction index, with AT&T and T-Mobile seeing declining numbers. Hesse said putting up those high numbers are good, but added that the fact that people are surprised “tells me we’ve still got a lot of work to do on the brand.”

As for the company’s always complicated relationship with Clearwire, Hesse said that things have been improving and pointed to the companies’ recently renegotiated wholesale deal.

Hesse also said that while its rivals were quick to team up on a mobile payments effort, Sprint is still figuring out its best option.

“We’re still evaluating what we want to do in mobile payments,” he said. “It’s fairly complex.”

And, of course, he talked a bit about his company’s opposition to AT&T’s plan to buy T-Mobile, but we all know how he feels about that.

As of the end of 2010, Intel Capital held about 10 percent of the equity in Clearwire, including more than 33 million of the Class A common stock, plus warrants on another 93,000 Class A shares. Clearwire’s 10-K shows that other Intel entities control another 65.6 million Class A shares and another 44 million shares of Class B Common stock. Between its holdings through Intel Capital and the other entities, Intel owns about one third of the equity in Clearwire and holds about 10 percent of the voting power. Clearwire’s biggest owner is Sprint, while Google, Comcast, and Time-Warner Cable also have a piece of the action. As John Paczkowski observed in 2008, its product may be called Clear, but its corporate structure is “clear as mud.”

It’s not the first time that Intel has reduced its holdings in Clearwire. In 2009, it said it would take a $950 million charge to write off part of the value of its Clearwire holdings given their poor performance in the market.

The move is certainly not going to help Clearwire shares today. After closing at $4.73 a share during the regular sessions, Clearwire fell to $4.55 after hours, which amounted to a drop of nearly 4 percent. And it’s no wonder Intel wants to cut its stake: Clearwire shares are down 41 percent over the last year.

On May 4, Clearwire reported a $227 million loss on revenue of $242 million. The problem was the curse of a growing subscriber base. It ended the quarter with 6.15 million subscribers, a surge of more than 500 percent over the 971,000 from the year-ago quarter, and said it expects to finish the year with more than 9 million subscribers. Costs are naturally through the roof, surging by 81 percent year on year to $930 million, causing it to burn through cash.

The company’s net loss was $227 million, or 93 cents per share, including the $202 million in charges.

On a more positive note, Clearwire said it now expects to end the year with approximately 9.5 million subscribers, up from a February prediction that it would end the year with around 8.8 million subscribers. The company said it continues to see its capital expenditures for this year to be less than $400 million and will make other cost cuts with a goal of improving its cash flow. Clearwire ended the first quarter with approximately 6.15 million total subscribers, including 1.29 million of its own retail customers and 4.86 million subscribers from wholesale partners, particularly Sprint.

The troubled company has seen a good deal of turmoil in recent months, including concerns by auditors, job cuts, a dispute with Sprint and a change in management. However, officials expressed confidence in the earnings release that things were headed in the right direction.

“Looking ahead, we expect to work closely with Sprint and all of our other wholesale partners to expand our 4G leadership and capitalize on our rich spectrum holdings that enable us to meet the exploding customer demand for mobile broadband internet access,” COO Erik Prusch said in a statement. “Since the beginning of the year, our network has experienced a 40 percent increase in network usage due to expanded coverage, record subscriber growth and higher usage per device.”

Under the new pact, Sprint commits to a minimum $300 million usage this year, $550 million next year and will pre-pay $175 million for 4G wholesale services to be used in the coming years. The two parties had said they were working on a new pact to resolve a dispute over wholesale pricing.

“Sprint has been our biggest and most important customer and partner since we launched 4G services in the U.S. more than two years ago,” Clearwire interim CEO John Stanton said in a statement. “Today’s agreement further aligns Sprint and Clearwire’s interests and lays the foundation for a continued, constructive relationship. We are pleased to have the resources and partnerships necessary to maintain our 4G leadership and leverage our significant spectrum and capacity for delivering mobile broadband services.”

Stanton took over as interim CEO last month amid a management shakeup. The company also cut jobs late last year and auditors have raised concerns about Clearwire’s future prospects.

Sprint, which owns a big chunk of Clearwire, also praised the new deal.

“We are pleased to reach this wholesale pricing agreement with Clearwire,” Sprint CEO Dan Hesse said in a statement. “We look forward to working with them under this new agreement to provide an expanded offering of 4G capabilities and solutions for Sprint customers.”

The deal also revises how Sprint is charged for devices that run on both its own 3G network and on Clearwire’s 4G network, ensuring that there is a minimum revenue for Clearwire per device and giving Sprint various volume and usage discounts.

Google made a record 48 acquisitions last year and hopes to make even more this year, continuing its aggressive M&A pace despite soaring start-up valuations.

And with nearly $35 billion in cash in hand and aggressive new CEO and co-founder Larry Page, it certainly has the means and drive to do it.

As CFO Patrick Pichette said during the company’s first quarter earnings call:

“We have the position to be able to jump and make big acquisitions…In the case of large transformative ones, we look at them all the time, right? If we had one that actually made sense to finally accelerate a big piece of our agenda, we would do it.”

So given those parameters, what makes sense?

Why not consider a few obvious candidates:

Twitter

This is the option that is most obvious and widely talked about in Silicon Valley.

The reasoning: Google needs a strong social networking offering and most of its efforts to create one organically have failed. Miserably, in fact.

The company’s +1 social affinity feature is its best attempt to date, but it’s not nearly enough to plug the company’s gaping social networking hole.

With Facebook emerging as a perceived and perhaps real competitive threat to Google’s core business, the company needs a strong social service. Twitter, with its natural rival positioning against Facebook, would give it that along with loads of real-time search data Google could likely monetize far more easily than Twitter itself.

The problem is that Twitter has said many times that it’s not for sale–despite the $8 billion to $10 billion valuation some say it might command. That could certainly change.

(Note: Despite a recent Fortune article that mentioned it almost offhandedly and at the end, as All Things Digital has reported previously, there was no official $10 billion Google bid for Twitter over the last year. Sources said Google execs told Twitter they were interested, but there was no formal bid. Not that there couldn’t be in the future and for that much!)

PRICE: $8 billion to $10 billion.

LinkedIn

Another way for Google to buy its way into the social networking space and differentiate itself from Facebook in the process. LinkedIn has filed to go public, but it could be mulling other options as well–such as being acquired by Google.

As Liz Gannes explained back in January:

Why would Google be interested in buying LinkedIn?

First, LinkedIn is a social service that’s clearly distinct from Facebook.

But would LinkedIn be the solution to Google’s existential questions about getting social?

That’s unclear, but the company does fit in on a thematic level with the search giant’s cloud-hosted enterprise product line. In addition, LinkedIn has created a central repository for corporate information and business people, which is already quite searchable but could be put to more uses.

PRICE: $2 billion to $3 billion

Groupon

Google offered more than $5 billion to buy Groupon last year but failed to close the deal. Had it managed it pull it off it would have become a leader in local commerce online, added a fast-growing revenue stream and gained a valuable source of consumer and merchant purchasing data.

Google’s reportedly working on an in-house version of Groupon, but who’s to say it won’t circle back and try to buy the real thing again. If it does, it needs to move quickly: the company is reportedly picking bankers for a planned public offering later this year and is expected to value at between $15 billion and $20 billion.

PRICE: Far more than $5 billion

Admeld

Here’s another company which has been linked to Google recently.

In 2010, advertisers spent some $353 million via real-time bidding (RTB), which allows them to evaluate and bid on ad space on an impression-by-impression basis. And in 2011 they’re likely to spend $823 million, according to Forrester.

Admeld is a big player in this increasingly important space and integrating it into Google’s Display Network might be a wise move.

Rumor has it the company tried to do as much earlier this year, making a $150 million to $200 million offer for the company, which was rebuffed.

PRICE: At least $500 million now.

Sprint

If Google wants to make wireless data access ubiquitous and affordable, buying Sprint would be a good start. It would provide the company with a large location-based advertising opportunity; imagine Google subsidizing network access to consumers willing to have ads, daily deals and localized promotions delivered to their phones.

It would also give Google the chance to deliver a true Android experience, one in which it controls the software, the hardware and the network.

Finally, Sprint holds a very large and very valuable chunk of the 2.5GHz spectrum.

That said, Google has shown little interest in becoming a wireless provider. And, given that all the major carriers sell Android devices, would the company want to replace strong positions at all the major carriers by owning No. 3?

PRICE: $14 billion

LightSquared or Clearwire

Google wants a world blanketed in wireless broadband. Acquiring either of these two companies would be a reasonable step toward that. LightSquared is building out a hybrid 4G-satellite mobile network capable of serving even the most rural of areas. It’s running LTE network trials in a number of U.S. cities with plans to launch commercial service before the end of this year.

Google invested $500 million in Clearwire in 2008. But with the company struggling financially, its bold plans to build out a massive nationwide WiMax network have been hamstrung. But this one is more unlikely, since Clearwire would be a pricey acquisition–complicated, too, since Sprint owns 54 percent of it. But it does have valuable spectrum and already has an expansive fourth-generation footprint that unfortunately is built on old technology and would need upgrading to LTE. And this acquisition would also bring Google closer to cable operators, such as Comcast and Time Warner, which also own a chunk of Clearwire.

But again, both raise the question of whether owning and operating a wireless network is something Google is capable of doing or even interested in.

PRICE: Clearwire–$1.4 billion. LightSquared: The big hedge fund Harbinger has put billions of dollars in assets into the company, so it’ll want many more out of it.

WebMD

Here’s one from left field–maybe too far left.

Acquiring the current leader in the online healthcare market would be one way to finally drag Google Health out of beta. A sophisticated health information site and a go-to channel for pharmaceutical and health/CPG advertisers, WebMD is a strong financial performer. Which makes it a compelling takeover target, particularly in a niche where Google does not have a dominant presence but is interested in developing one.

Caveat: Google is rumored to be considering ramping down its support for Google Health, which could be viewed as an indication of a growing disinterest in the sector–or a decision to buy its way into it with a major acquisition. It did it before with Google Video–remember that?–before it bought YouTube.

PRICE: $3.1 billion

IAC/InterActiveCorp

Google says it’s not a media company, but it distributes and monetizes content just like one. If it wanted to produce it as well, acquiring IAC might be a reasonable way to begin.

With the exception of its search engine Ask.com–which has a search deal with Google–and its video-sharing Web site Vimeo–which would likely cause it regulatory woes–IAC’s disparate portfolio of media properties would make for an interesting acquisition.

There are 50 sites to be had here, among them some fairly high-profile ones: local guide Citysearch, online personals site Match.com, CollegeHumor, Newsweek/Daily Beast, and restaurant guide Urban Spoon.

PRICE: $2.7 billion

An Unnamed Alternative Energy Company

When Google won approval from the Federal Energy Regulatory Commission to enter the speculative energy trading business, it insisted that its goal was simply to keep energy costs down by hedging power consumption against market movements.

But that approval also gives Google the ability to “act as a power marketer, purchasing electricity and reselling it to wholesale customers.” And the company does have a Google Energy subsidiary and a smartgrid electricity consumption monitoring service called Google PowerMeter.

Pike Research claims the global market for smartgrid analytics will hit $4.2 billion by 2015.

Google is also an investor, through its Google Ventures arm, in Silver Spring Networks, a leading smart grid solutions provider, and, through Google.org, solar energy outfit BrightSource.

Add to this the company’s interest in plug-in hybrid cars and it’s easy to see it making an investment in this space, particularly with Page intent on making “big bets” as its CEO.

PRICE: ?

Who’s missing? A music company such as Warner Music? A movie studio (hey, Apple’s Steve Jobs–whom Page seems to be trying to mimic in style, though we’ll wait and see on substance–had one!).

Sound off in the comments.

PREVIOUSLY:

• Where’s the Other Twin, Sergey Brin, Been During GoogQuake?
• PageYank: As New SVPs Are Born at Google in CEO Reorg, What Happens to the Old Ones?
• Google’s Page Begins Major Reorg: Engineers, Not Managers, In Charge
• Product Chief Jonathan Rosenberg to Leave Google
• Larry Page as CEO: Steve Jobs or Jerry Yang?

“We anticipate there will be some markets we will have to divest,” Mr. Stephenson said in an interview.

AT&T’s proposed plan to buy T-Mobile from Deutsche Telekom AG for $39 billion is expected to face heavy scrutiny from regulators and opposition from consumer-advocacy groups and competitors. Rivals Sprint Nextel Corp. and Clearwire Corp. have already been vocal about the harmful impact from the deal.

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Speaking at the CTIA 2011 show in Orlando, Lightsquared CEO Sanjiv Ahuja said that the two companies will begin trials of the service in the first quarter of next year and that more details of the deal will be made public soon.

Earlier this week, Lightsquared announced a roaming deal with Leap Wireless that will allow customers of that company’s Cricket service to eventually roam onto Lightsquared’s LTE network.

Although innovative, the notion of building out a network and acting as a wholesale provider has proved troublesome in the past. Most recently, Clearwire has struggled with the cost of building and operating its WiMax-based 4G network.

Ahuja drew a distinction, though, noting that while Clearwire also sells service direct to consumers, Lightsquared is pursuing a wholesale-only approach.

“We will never compete with our customers for end users,” he promised.

Among the company’s potential partners, he said, are retailers, other wireless providers and even laptop makers looking to have a more ongoing connection with their customers.

In a speech big on vision and short on details, Ahuja talked about the vast potential of his company to revolutionize the wireless industry and ease the looming spectrum crunch. He also pledged that the company will spend $14 billion in network infrastructure and operations costs over the next 8 years as it builds and operates its network.

“Ladies and gentleman, stay tuned,” Ahuja said. “In the coming days months and weeks you will be hearing a lot more from us.”

To most observers, the deal will come as a surprise since earlier reports had pegged Sprint and T-Mobile in discussions.

The combination of T-Mobile and AT&T makes much more sense given that the two use the same GSM technology. However, the deal will likely face steep regulatory hurdles as it will mean that the country will go from having four major national wireless carriers to three (and from two major GSM providers to one).

T-Mobile, which is owned by the German telecom company, has been struggling to add customers over the past year. It also does not have a strategy for updating its network to true 4G technology (while it has claimed to have 4G for quite some time, truthfully it’s really only 3G on steroids).

The lack of airwaves–the equivalent of gold for the wireless carriers as consumers gobble up broadband by using their phones to surf the Web, watch movies and perform other data-intensive activities–was listed as the chief reason for the acquisition.

In a news release, AT&T said the acquisition of T-Mobile USA “provides an optimal combination of network assets to add capacity sooner than any alternative, and it provides an opportunity to improve network quality in the near term for both companies’ customers. In addition, it provides a fast, efficient and certain solution to the impending exhaustion of wireless spectrum in some markets, which limits both companies’ ability to meet the ongoing explosive demand for mobile broadband.”

Now, AT&T said, it will be able to ramp up the roll out of LTE and will be able to deploy LTE to 95 percent of the U.S. population, reaching an additional 46.5 million Americans beyond current plans (including rural communities and small towns). AT&T has struggled to keep pace with Verizon Wireless, which has already blanketed the country with LTE, also known as 4G.

By offering better service, it could convince antitrust regulators that the combination of the two companies is a necessity.

AT&T pointed out in a separate email to us that the U.S. is one of the few countries in the world where a large majority of consumers can choose from five or more wireless providers in their local market.

Deutsche Telekom, which always considered T-Mobile USA as its darling, will now own eight percent of AT&T. A Deutsche Telekom representative will join the AT&T board of directors.

The $39 billion purchase price will include a cash payment of $25 billion, with the balance to be paid using AT&T stock. AT&T has the right to increase the cash portion by up to $4.2 billion with a corresponding reduction in the stock component, so long as Deutsche Telekom still receives at least a five percent equity ownership interest.

The deal has an unspecified break-up fee and will take a year to close.

The acquisition, if it is approved, will put more pressure on Sprint, which is the third-largest carrier in the U.S. It owns a majority of Clearwire, on which it is relying on for its 4G network. Just recently, Clearwire went through a major management shake-up, signaling that changes could be occurring there as well.

Together, AT&T and T-Mobile will be the largest network in the U.S., with 129.2 million subscribers, just barely beating out Verizon Wireless, with 101.1 million.

Here’s the entire press release:

DALLAS & BONN, Germany–(BUSINESS WIRE)–AT&T Inc. (NYSE: T) and Deutsche Telekom AG (FWB: DTE) today announced that they have entered into a definitive agreement under which AT&T will acquire T-Mobile USA from Deutsche Telekom in a cash-and-stock transaction currently valued at approximately $39 billion. The agreement has been approved by the Boards of Directors of both companies.

“This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation’s future”
AT&T’s acquisition of T-Mobile USA provides an optimal combination of network assets to add capacity sooner than any alternative, and it provides an opportunity to improve network quality in the near term for both companies’ customers. In addition, it provides a fast, efficient and certain solution to the impending exhaustion of wireless spectrum in some markets, which limits both companies’ ability to meet the ongoing explosive demand for mobile broadband.

With this transaction, AT&T commits to a significant expansion of robust 4G LTE (Long Term Evolution) deployment to 95 percent of the U.S. population to reach an additional 46.5 million Americans beyond current plans – including rural communities and small towns. This helps achieve the Federal Communications Commission (FCC) and President Obama’s goals to connect “every part of America to the digital age.” T-Mobile USA does not have a clear path to delivering LTE.

“This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation’s future,” said Randall Stephenson, AT&T Chairman and CEO. “It will improve network quality, and it will bring advanced LTE capabilities to more than 294 million people. Mobile broadband networks drive economic opportunity everywhere, and they enable the expanding high-tech ecosystem that includes device makers, cloud and content providers, app developers, customers, and more. During the past few years, America’s high-tech industry has delivered innovation at unprecedented speed, and this combination will accelerate its continued growth.”

Stephenson continued, “This transaction delivers significant customer, shareowner and public benefits that are available at this level only from the combination of these two companies with complementary network technologies, spectrum positions and operations. We are confident in our ability to execute a seamless integration, and with additional spectrum and network capabilities, we can better meet our customers’ current demands, build for the future and help achieve the President’s goals for a high-speed, wirelessly connected America.”

Deutsche Telekom Chairman and CEO René Obermann said, “After evaluating strategic options for T-Mobile USA, I am confident that AT&T is the best partner for our customers, shareholders and the mobile broadband ecosystem. Our common network technology makes this a logical combination and provides an efficient path to gaining the spectrum and network assets needed to provide T-Mobile customers with 4G LTE and the best devices. Also, the transaction returns significant value to Deutsche Telekom shareholders and allows us to retain exposure to the U.S. market.”

As part of the transaction, Deutsche Telekom will receive an equity stake in AT&T that, based on the terms of the agreement, would give Deutsche Telekom an ownership interest in AT&T of approximately 8 percent. A Deutsche Telekom representative will join the AT&T Board of Directors.

Competition and Pricing

The U.S. wireless industry is one of the most fiercely competitive markets in the world and will remain so after this deal. The U.S. is one of the few countries in the world where a large majority of consumers can choose from five or more wireless providers in their local market. For example, in 18 of the top 20 U.S. local markets, there are five or more providers. Local market competition is escalating among larger carriers, low-cost carriers and several regional wireless players with nationwide service plans. This intense competition is only increasing with the build-out of new 4G networks and the emergence of new market entrants.

The competitiveness of the market has directly benefited consumers. A 2010 report from the U.S. General Accounting Office (GAO) states the overall average price (adjusted for inflation) for wireless services declined 50 percent from 1999 to 2009, during a period which saw five major wireless mergers.

Addresses wireless spectrum challenges facing AT&T, T-Mobile USA, their customers, and U.S. policymakers

This transaction quickly provides the spectrum and network efficiencies necessary for AT&T to address impending spectrum exhaust in key markets driven by the exponential growth in mobile broadband traffic on its network. AT&T’s mobile data traffic grew 8,000 percent over the past four years and by 2015 it is expected to be eight to 10 times what it was in 2010. Put another way, all of the mobile traffic volume AT&T carried during 2010 is estimated to be carried in just the first six to seven weeks of 2015. Because AT&T has led the U.S. in smartphones, tablets and e-readers – and as a result, mobile broadband – it requires additional spectrum before new spectrum will become available. In the long term, the entire industry will need additional spectrum to address the explosive growth in demand for mobile broadband.

Improves service quality for U.S. wireless customers

AT&T and T-Mobile USA customers will see service improvements – including improved voice quality – as a result of additional spectrum, increased cell tower density and broader network infrastructure. At closing, AT&T will immediately gain cell sites equivalent to what would have taken on average five years to build without the transaction, and double that in some markets. The combination will increase AT&T’s network density by approximately 30 percent in some of its most populated areas, while avoiding the need to construct additional cell towers. This transaction will increase spectrum efficiency to increase capacity and output, which not only improves service, but is also the best way to ensure competitive prices and services in a market where demand is extremely high and spectrum is in short supply.

Expands 4G LTE deployment to 95 percent of U.S. population – urban and rural areas

This transaction will directly benefit an additional 46.5 million Americans – equivalent to the combined populations of the states of New York and Texas – who will, as a result of this combination, have access to AT&T’s latest 4G LTE technology. In terms of area covered, the transaction enables 4G LTE deployment to an additional 1.2 million square miles, equivalent to 4.5 times the size of the state of Texas. Rural and smaller communities will substantially benefit from the expansion of 4G LTE deployment, increasing the competitiveness of the businesses and entrepreneurs in these areas.

Increases AT&T’s investment in the U.S.

The acquisition will increase AT&T’s infrastructure investment in the U.S. by more than $8 billion over seven years. Expansion of AT&T’s 4G LTE network is an important foundation for the next wave of innovation and growth in mobile broadband, ensuring the U.S. continues to lead the world in wireless technology and availability. It makes T-Mobile USA, currently a German-owned U.S. telecom network, part of a U.S.-based company.

An impressive, combined workforce

Bringing AT&T and T-Mobile USA together will create an impressive workforce that is best positioned to compete in today’s global economy. Post-closing, AT&T intends to tap into the significant knowledge and expertise held by employees of both AT&T and T-Mobile USA to succeed. AT&T is the only major U.S. wireless company with a union workforce, offering leading wages, benefits, training and development for employees. The combined company will continue to have a strong employee and operations base in the Seattle area.

Consistent with AT&T’s track record of value-enhancing acquisitions

AT&T has a strong track record of executing value-enhancing acquisitions and expects to create substantial value for shareholders through large, straightforward synergies with a run rate of more than $3 billion, three years after closing onward (excluding integration costs). The value of the synergies is expected to exceed the purchase price of $39 billion. Revenue synergies come from opportunities to increase smartphone penetration and data average revenue per user, with cost savings coming from network efficiencies, subscriber and support savings, reduced churn and avoided capital and spectrum expenditures.

The transaction will enhance margin potential and improve the company’s long-term revenue growth potential as it benefits from a more robust mobile broadband platform for new services.

Additional financial information

The $39 billion purchase price will include a cash payment of $25 billion with the balance to be paid using AT&T common stock, subject to adjustment. AT&T has the right to increase the cash portion of the purchase price by up to $4.2 billion with a corresponding reduction in the stock component, so long as Deutsche Telekom receives at least a 5 percent equity ownership interest in AT&T.

The number of AT&T shares issued will be based on the AT&T share price during the 30-day period prior to closing, subject to a 7.5 percent collar; there is a one-year lock-up period during which Deutsche Telekom cannot sell shares.

The cash portion of the purchase price will be financed with new debt and cash on AT&T’s balance sheet. AT&T has an 18-month commitment for a one-year unsecured bridge term facility underwritten by J.P. Morgan for $20 billion. AT&T assumes no debt from T-Mobile USA or Deutsche Telekom and continues to have a strong balance sheet.

The transaction is expected to be earnings (excluding non-cash amortization and integration costs) accretive in the third year after closing. Pro-forma for 2010, this transaction increases AT&T’s total wireless revenues from $58.5 billion to nearly $80 billion, and increases the percentage of AT&T’s total revenues from wireless, wireline data and managed services to approximately 80 percent.

This transaction will allow for sufficient cash flow to support AT&T’s dividend. AT&T has increased its dividend for 27 consecutive years, a matter decided by AT&T’s Board of Directors.

Conditions

The acquisition is subject to regulatory approvals, a reverse breakup fee in certain circumstances, and other customary regulatory and other closing conditions. The transaction is expected to close in approximately 12 months.

MORE COVERAGE

• AT&T’s President on Why T-Mobile Deal Should Pass Muster and Won’t be a Customer Nightmare
• Sprint: AT&T’s T-Mobile Buy Would “Dramatically Alter” Market
• T-Mobile’s Memo to Staff on the AT&T Deal
• T-Mobile: We Were Totally Kidding About AT&T’s Crappy Network!
• What AT&T Owes T-Mobile if Deal Doesn’t Go Through
• T-Mobile USA: No, We’re Not Getting the iPhone Yet
• First Casualty of AT&T Deal: T-Mobile Drops From CTIA Panel

Morrow, who is leaving for “personal reasons,” will be replaced on an interim bases by company board Chairman John Stanton, former CEO of VoiceStream Wireless. Morrow (pictured here) will serve as an advisor during the transition.

Also leaving the WiMax service provider are former Microsoft executive Mike Sievert, one Microsoft’s chief commercial officer, and CIO Kevin Hart. Both are leaving the company “to pursue other opportunities.”

At the same time, Clearwire said it is promoting CFO Erik Prusch to the newly created chief operating officer spot. Treasurer Hope Cochran will assume Prusch’s former role as chief financial officer.

Clearwire said that the shake-up won’t affect its progress in resolving a dispute with Sprint over wholesale pricing.

“Clearwire believes that an agreement with Sprint is imminent,” it said in a statement.

However, the company’s longer-term picture remains unclear. The company laid off workers in November as auditors questioned the its ability to operate as a going concern.

Currently Clearwire sells its WiMax service directly to consumers and on a wholesale basis to Sprint, which owns a significant stake in the company.

The shift represents a victory for Sprint Nextel, the No. 3 U.S. wireless carrier by subscribers, which owns a non-controlling majority stake in the next-generation wireless-service provider and relies on the company’s 4G network to service its customers.

Sprint has long argued that Clearwire should spend its limited capital on finishing the expansion of its network, but Clearwire has insisted on maintaining an independent retail strategy that competes with the Sprint brand.

Read the rest of this post on the original site »

But then again, it’s not the most aggressive move Reed Hastings could make. Note that the chart Netflix provides makes it quite difficult to really evaluate broadband provider against broadband provider, without doing a whole lot of squinting.

And even then, I can’t tell which light-blue line represents CableOne and which one represents CenturyTel.

We do know, because Netflix already told us, that Charter gets the best marks. And it appears that Clearwire, the wireless service co-owned by Sprint and some of the big cable companies, ranks dead last.

The news that most of you care about: Time Warner Cable and Comcast, the nation’s two biggest cable companies, appear to be in the top part of Netflix’s rankings. I’m asking the company for clarification for those of us with decaying vision.

And here it is, via CNET–a top-to-bottom ranking:

1. Charter
2. Comcast
3. Time Warner
4. Cox
5. Suddenlink
6. Cablevision
7. Cable One
8. Verizon
9. AT&T
10. BellSouth
11. Embarq
12. Windstream
13. Qwest
14. Century Tel
15. Frontier
16. Clearwire

You can click on the chart below to see a larger version, and you can read a technical explanation of what it measures over at the official Netflix tech blog.

McCaw’s resignation is effective on Friday, Clearwire said in the filing with the Securities and Exchange Commission. Clearwire, which is majority owned by Sprint Nextel, said that the move is not due to any disagreements with the company, but did not offer any additional information about McCaw’s reasons for stepping down.

The first extension of the event, it produced some very newsy sessions. We’ll be posting them all.

Today, Sprint Nextel CEO Dan Hesse talks about battling the leaders for dominance among wireless carriers.

It’s not easy being No. 3, but Hesse has tried to mind the gap by beefing up Sprint’s customer service and investing in the prepaid sector to attract a wider audience during the economic downturn. Going forward, Sprint looks to its 4G strategy for growth through its ownership stake in WiMax-provider Clearwire.

Here’s the video of the Hesse interview with Walt Mossberg:

Next up: Glenn Lurie, the man who brought the Apple iPhone to AT&T (for better and worse).

]]> http://allthingsd.com/20101227/d-dive-into-mobile-the-full-interview-video-of-sprint-nextels-dan-hesse/feed/ 2 http://allthingsd.com/20101207/sprint-nextel-ceo-dan-hesse-talks-about-clearwire-video/ http://allthingsd.com/20101207/sprint-nextel-ceo-dan-hesse-talks-about-clearwire-video/#comments Wed, 08 Dec 2010 05:24:18 +0000 Arik Hesseldahl http://newenterprise.allthingsd.com/?p=326

In an interview at D: Dive Into Mobile, Sprint-Nextel CEO Dan Hesse said that despite the fact it owns roughly 54 percent of Clearwire, Sprint doesn’t control the company or its board of directors. Walt Mossberg gave him a little grief about it, asking, “Who did that deal?”

Also during the interview: Why it made sense to have an outside company build its 4G network, what’s different between 3G and 4G and whether or not 4G is really unlimited. He also talked about why he likes Consumer Reports while other wireless executives don’t.

]]> http://allthingsd.com/20101207/sprint-nextel-ceo-dan-hesse-talks-about-clearwire-video/feed/ 0 http://allthingsd.com/20101207/sprint-ceo-dan-hesse-at-dive-into-mobile/ http://allthingsd.com/20101207/sprint-ceo-dan-hesse-at-dive-into-mobile/#comments Tue, 07 Dec 2010 22:45:26 +0000 Tricia Duryee http://emoney.allthingsd.com/?p=222

When Sprint CEO Dan Hesse joined the company three years ago, the third-largest carrier was bleeding subscribers from having a poor reputation for customer service and facing stiff competition from the likes of AT&T, which holds the exclusive on the iPhone.

Since then, Sprint has stemmed the losses, mostly by beefing up its customer service and by investing in the prepaid sector to attract a wider audience during the economic downturn. Going forward, Sprint looks to its 4G strategy for growth through its ownership stake in WiMax-provider Clearwire. Next up, Hesse joins Walt Mossberg onstage.

3:45 pm: Walt welcomes Dan Hesse to the stage. You can’t have mobile without networks, says Walt. You’ve led the way on 4G; tell us about it.

3:46 pm: Dan: We are getting San Francisco up soon, and will have 120 million POPs by the end of the year, or about a third of the country.

He explains what 4G is: 3G for was email and Web pages, but 4G is for multimedia and video.

The best analogy is that 4G is the wide open freeway vs. an interstate that provides the same speeds, but you have to stop along the way.

3:48 pm: Walt: Why are you using WiMax when the two other carriers are using LTE?

Hesse: Back in 2008, we wanted to be first, and WiMax was available right now. (Lots to do with TDD, and other technical mumbo jumbo). Technically, there’s no difference. I can’t deny that LTE will be a bigger ecosystem, but we couldn’t wait. We thought the market was ready.

With the success of the iPhone, we thought it was ready now.

Walt: How much leadership did it give you?

Hesse: Well, it made Verizon move a lot faster….In 2010, we’ll have 120 million POPs, and the EVO and Epic (two 4G phones) have been really successful.

Walt: How successful?

Hesse: If you were to go to Clearwire’s wholesale numbers, you should think of Sprint’s lion’s share of the wholesale numbers.

Walt: Was it worth the investment?

Hesse: I think so.

3:53 pm: Hesse: 4G is one element of many.

Walt: You like Consumer Reports, unlike the guy here earlier [AT&T's Glenn Lurie].

Hesse: Sprint is the fastest growing brand of postpaid in the U.S.–not the Nextel brand, where we’ve been losing subscribers.

3:55 pm: Walt: Are you going to get the iPhone?

Hesse: Can’t say.

Walt: Would you like the iPhone?

Hesse: Under the right conditions, yes, I would. It’s a wonderful phone.

3:56 pm: Backing up a bit, Walt now asks about an industry trend toward tiered pricing for data plans, where the more you use, the more you pay.

Sprint hasn’t yet limited users’ traffic.

Hesse: Customers will pay a premium for simplicity. Even if it’s not in their best economic interest, they will go with the unlimited plan. We were the first to come out with truly unlimited text, voice and data with the Simply Everything plan.

3:59 pm: Walt: Are you not going to do tiered pricing?

Hesse: So far, we aren’t, he says, which gets a round of applause from the audience. But Sprint did up the cost of the unlimited plans of the most capable devices on the network.

4:00 pm: Walt: Unlimited means unlimited or doesn’t it?

Hesse: No, it doesn’t. What if they have the SlingBox streaming 24×7?

4:01 pm: Hesse: The trend is toward one plan for all of your devices, like tablets, phones, PCs, etc.

Walt: Are you going to offer plans for all those devices?

Hesse: We are thinking about it. That’s the next step to simplicity. Three years ago, it was about one device.

4:02 pm: Walt: People aren’t counting minutes, now they are counting megabytes and things people don’t understand.

Hesse: Something has to give; what’s going to be the form? Do you have meters, do you have tiers, do you increase the price of the unlimited plans?

Another option is to have a lot more spectrum available to add capacity at a lower cost.

Walt: Are you talking about taking away the spectrum that the elderly use to watch their TV?

Hesse: If more spectrum is available, you can use more frequencies, which is a lot less expensive than splitting cell sites and putting in more towers.

Walt: There’s some confusion about Clearwire. They are opening stores and selling laptops and modems. You own most of that company, and they are building your WiMax network. Why are they competing with you?

Hesse: I have a wholesale business that resells minutes to Leap, so it’s the same thing.

4:06 pm: Walt’s giving Hesse grief about the structure of the Clearwire deal. Despite Sprint owning roughly 54 percent of the company, Sprint doesn’t control the board.

Walt: Who did that deal?

Hesse: Two thumbs pointing at himself [me]. When you have this many owners of the company, we can’t agree.

4:08 pm: Walt: What’s the value of 4G?

Hesse: The experience is really fast, and we offer unlimited plans on 4G. There’s a five-gigabyte cap on 3G, but 4G is completely unlimited.

Walt’s curious if 4G is really life-changing and transformative. Sprint’s beating the other guys by 2x, not 10x or 20x.

Hesse: My son showed me his speed test on his EVO at home, and it was over 8 mbps, so it depends.

4:11 pm: Questions from the audience. The Seattle Times’ Brier Dudley asks about the potential deal between Clearwire and T-Mobile, which may be falling apart because of Clearwire’s recent $1 billion in debt that it has raised.

Hesse deflects the question despite several reports to the contrary, by saying he didn’t know anything about that.

Another audience question: What’s your stance on network neutrality?

Hesse: The FCC has come out with a proposal, and we are very supportive of it.

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]]> http://allthingsd.com/20101207/sprint-ceo-dan-hesse-at-dive-into-mobile/feed/ 1 http://allthingsd.com/20101201/silicon-valley-go-to-guy-peter-currie-to-join-twitter-board/ http://allthingsd.com/20101201/silicon-valley-go-to-guy-peter-currie-to-join-twitter-board/#comments Wed, 01 Dec 2010 11:53:56 +0000 Kara Swisher http://kara.allthingsd.com/?p=37832

According to sources close to the situation, well-known Silicon Valley power player Peter Currie is joining the board of directors of Twitter.

It’s an interesting choice to bring the well-regarded moneyman to the microblogging start-up, and could indicate an intent to push to an IPO eventually.

As first reported by NetworkEffect’s Liz Gannes earlier this week, Twitter is now considering funding offers from big venture funds, specifically Russia’s DST Global and Silicon Valley’s Kleiner Perkins, as well as fielding incoming acquisition interest from Google and Facebook.

Currie should know about this kind of noisy swirl around a hot start-up.

Back in the heyday of Web 1.0, as the CFO of Netscape Communications, he led the iconic browser software company into history, as the first great Internet rocket ship, when it went public on August 9, 1995.

While the Netscape experience ended in tears, Currie’s career has not, and he has become a kind of go-to elder statesman in the Web 2.0 era.

A year ago, for example, he joined Facebook as its temporary CFO.

That move came after the social networking site, in a bit of turmoil, parted ways with its then CFO, Gideon Yu, following mutual disagreements.

Indeed, Currie plays the calm, collected wise man well.

Unusually tall, aggressively avuncular and laid-back, he loves Elvis and enjoys pranking reporters like BoomTown.

(Case in point: Back in the day, he spread the rumor around Silicon Valley that I was short due to a medical condition.)

Now the president of Currie Capital, a private investment firm, he had previously worked at General Atlantic in private equity.

After Netscape, he was a partner and co-founder of the Barksdale Group, an early-stage (and ill-fated) venture capital firm.

Before Netscape, he was CFO of McCaw Cellular Communications and also worked at Morgan Stanley.

Currie is also board-happy, serving as a director of a variety of tech firms, private and public, which have had varying degrees of success.

They have included CNET, Critical Path, Clearwire, Safeco, Ofoto, Tellme Networks and Zantaz, as well as Sun Microsystems.

He has an MBA from Stanford University and went to Williams College.

In other words, just the kind of pedigree needed to give some additional burnish to the Twitter board, which now includes Fred Wilson of Union Square Ventures, Spark Capital’s Bijan Sabet, Benchmark Capital’s Peter Fenton, co-founder and former CEO Evan Williams, co-founder Jack Dorsey and CEO Dick Costolo.

Apparently, it’s time to toss another dude in there!

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