Almost one year later, FCC approves AT&T buyout of Centenial

Well it’s been a long time coming, but the FCC has finally given it’s approval for AT&T to buy out operator Centennial Communications. Five days from now, it will have been a year since the larger operator announced it’s intentions for the purchase, which is valued at almost $3 billion.

Who is Centennial?

Centennial is a cell phone operator that began in New Jersey in 1988. It has done very well for itself since then. It now provides wireless and broadband services to almost 900,000 subscribers in the American Midwest, Southeast and in the Virgin Islands and Puerto Rico.

What’s the deal?

AT&T is buying the entire company out, at a rate of roughly $3,000 dollars per acquired customer. Given that there will be pretty much no infrastructure or upgrade expenditures (for basic services), that’s a pretty good deal. The majority of the work to be done by AT&T is rebranding - it has a lot signage to replace in a lot of Centennial retail stores. But this work is going to be spread out over the next years. Not only that, but Centennial subscribers will have the option to stick with their current Centennial price plans for the time being - or choose to straight switch over to an AT&T plan at no further expense.

Probably the biggest expense incurred by AT&T will be in expanding its 3G network. There are plans to deploy 3G at over 200 sites in the Centennial network, before the network asks customers to transition over to AT&T.

Then, of course, there’s the LTE deployment to take care of…

What’s this business with the FCC?

Centennial is the 9th largest operator in the United States. With an acquisition of this size, the FCC always has to consider whether it could damage competitiveness. In order to keep things on an even keel, the FCC required AT&T to “divest” eight different service areas - five of which ended up being acquired by Verizon Wireless.

A further demand was made by the FCC for mobile roaming. AT&T will have to the roaming agreements that Centennial made with other carriers for the entire life of the contract - or for up to four years if it’s with a smaller operator.

What we think?

The easiest subscriber to acquire is the one that doesn’t have an existing contract. Once a consumer is signed up with someone, it takes a lot to get them to jump ship. And you’d have to look a long way to find someone in the US who doesn’t have a contract already.

So it makes sense for AT&T to simply buy those customers. Centennials debts included, the purchase has set them back $3 billion - but how long will it take them to make that back? Especially once they can start offering juicy 3G (and 4G pretty soon) services to subscribers.