[Satellite News 09-15-09] Mobile operators in the United States are now more likely to consolidate as smaller carriers struggle to find success with revamped pricing schemes and product-positioning strategies in a saturated domestic communications market environment, according to Tammy Parker, principal analyst at Informa Telecoms and Media.
    Market maturation and price wars have led to rumors of significant consolidation in the U.S. mobile industry. Deutsche Telekom, parent company of T-Mobile USA, is considering a bid for Sprint Nextel, which is already intending to take over Virgin Mobile USA in a $483 million stock deal. If the transaction happens, Deutsche Telekom will acquire Sprint’s existing 13.1 percent stake in Virgin Mobile.
    Parker said that the mergers and acquisitions would face scrutiny from industry regulators and the aggressively anti-trust Obama administration. “This could keep large [acquisition] 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 Parker, who added that T-Mobile and Sprint operate several networks, all with different air-interface technologies, which could create an integration nightmare.
    The rumors of Sprint’s acquisition are supported by evidence of its own investment troubles. In a report released in August, Terry Norman, senior analyst at Anlaysys Mason, said his firm especially was alarmed by WiMax investors writing off billions of dollars in Clearwire, majority-owned by Sprint, which was planning to roll out with a national WiMax network through Clearwire this year. Norman said that in developed markets like the United States and Europe, the WiMax industry is in hot water, as its investments are disappearing due to a shift in interest towards Long-Term Evolution (LTE) platforms. The drain of WiMax financing may have a major impact on the future health of the U.S. mobile operator market.
    Parker discussed another possible merger – between regional U.S. carriers MetroPCS Communications and Leap Wireless, which have taken financial hits as their low-end, unlimited and prepaid service plans have been 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 … The two companies command a combined 60 percent of the mobile market, but smaller rivals continue trying to outmaneuver these top players as well as one another,” said Parker.
    Despite its acquisition predictions, Parker expects U.S. mobile operators to continue generating revenue – whether through consolidation, the addition of innovative revenue streams, or new pricing and equipment strategies – citing positive figures. “There were 280.57 million mobile subscriptions in the U.S. during the second quarter of 2009, and U.S. mobile market penetration during 2Q09 finally reached the 90 percent milestone. We expect U.S. penetration to exceed 100 percent at end-2012 and to reach nearly 113 percent by end-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,” said Parker.