Bloomberg – Diana ben-Aaron and Matthew Campbell
AT&T Inc. (T)’s $39 billion agreement to buy T-Mobile USA from Deutsche Telekom AG (DTE) may spell fewer orders and thinner margins for Ericsson AB and other telecommunications-equipment suppliers.
“Any merger of this magnitude would mean some capex will be pushed back short term on uncertainty,” said Haakan Wranne, an analyst with Swedbank in Stockholm. “And when two operators merge into one, the capex cake will not grow long-term.”
The purchase, the largest in the wireless industry since 2004, will result in as much as $40 billion in savings, including on network overlap and spectrum purchases, AT&T said. For equipment suppliers such as Ericsson, Nokia Siemens Networks and Alcatel-Lucent SA, the combined company to create the U.S.’s biggest mobile-phone operator will have the buying power to demand lower prices on infrastructure equipment.
“The merged company may discuss ways to squeeze suppliers a bit more,” said Thomas Langer, an analyst at WestLB in Dusseldorf, Germany. “Margins are somewhat higher in the U.S. to begin with.”
The proposed deal comes amid a rebound in demand for equipment makers after the economic slump in 2009 and last year cut into sales. Bandwidth-hogging devices such as Apple Inc. (AAPL)’s iPhones and iPads and handsets based on Google Inc.’s Android with access to videos and games are driving operators to beef up their networks. (Full Article)