Market maturation and the accompanying price wars have led to rumours of impending market consolidation among the smaller US mobile players. The latest rumour is that Deutsche Telekom, parent of fourth-place operator T-Mobile USA, is pondering a bid for Sprint Nextel, the third-largest US operator. Sprint itself is already intending to take over all of Virgin Mobile USA in a stock deal valued at $483 million, including Sprint’s existing 13.1% stake in the US MVNO.
Any major mergers and acquisitions will face scrutiny from regulators and the Obama administration, which has reiterated that it will keep a close eye on antitrust and competitive issues related to any significant M&A activity going forward.
“This could keep large M&A deals from coming to fruition anytime soon. A combination of T-Mobile and Sprint could be particularly tricky in the current environment, not only due to the size of the potential deal but also because of foreign ownership issues that would have to be debated on both sides of the Atlantic,” said Tammy Parker, principal analyst with Informa Telecoms & Media.
She added: “Further, T-Mobile and Sprint operate several networks, all with different air-interface technologies, which would create an integration challenge, if not a nightmare.”
Meanwhile, rumours circulate regarding a possible merger of regional US carriers MetroPCS Communications and Leap Wireless International, which have both seen their low end, unlimited, prepaid service plans copied by national operators.
“Smaller competitors are struggling to survive and match economies of scale enjoyed by the two largest mobile operators, Verizon Wireless and AT&T,” stated Parker.
Regardless of any M&A activity, Informa expects US mobile operators to continue looking for competitive advantages wherever they can, whether through consolidation, the addition of innovative revenue streams, or new pricing and equipment strategies. “The two top US operators, Verizon and AT&T, command a combined 60% of the mobile market, but smaller rivals continue trying to out-manoeuvre these top players as well as one another,” continued Parker.
There were 280.57 million mobile subscriptions in the US during 2Q09, and US mobile market penetration during 2Q09 finally reached the 90% milestone, according to Informa Telecoms & Media. Informa expects US penetration to exceed 100% at end-2012 and to reach nearly 113% by the end of 2014.
“This will be enabled by individuals having multiple subscriptions, integration of mobile communications access into consumer-electronics devices and increasing use of M2M communications,” Parker concluded.