Verizon Communications has hired advisers to prepare a possible $100 billion bid to take full control of Verizon Wireless from its partner Vodafone, according to Reuters. The latest rumor is but the latest rumor about Verizon buying the Vodafone stake.
Among the recent rumors AT&T and Verizon bid for all of Vodafone. Given slower growth in most mobile markets globally, and very low interest rates, the merger activity in the U.S. and other markets is logical.
When firms cannot grow organically, they typically acquire growth. And growth now is the issue.
AT&T first quarter 2013 earnings were stronger than for most major telcos in Europe, for example. But even AT&T’s consolidated revenues of $31.4 billion were down 1.5 percent compared to the same quarter of 2012.
Other major telcos are facing headwinds stronger than AT&T. France Telecom revenues might actually drop in 2013. Telefonica had earnings issues most of 2012 as well.
There are basically two major ways mobile service providers or fixed network service providers can grow revenues: they can add more units (subscribers) or grow revenue per unit (average revenue per user).
And it is starting to look as though even mobile services, which have been the growth driver for the U.S. telecommunications industry, is facing a new era, when subscriber growth in the internal market can be propped up, near term, mostly by acquiring other firms.
In other words, the internal U.S. market is approaching a zero-sum game, where one carrier can gain only by taking share from another supplier.
That is one primary reason why U.S. suppliers are so interested in machine-to-machine services, as that could add unit growth from telemetry services sold to other enterprises, rather than “humans.”
Retail net additions (postpay and prepaid net additions) for the three largest U.S. wireless service providers declined 23 percent on a year-over-year basis during third quarter 2012 to approximately 1.6 million, according to Fitch Ratings.
The decline is largely attributable to a 62 percent year-over-year drop in prepaid net additions. In other words, not even a consumer shift of demand from postpaid to prepaid now is sufficient to propel revenues for some suppliers who specialize in prepaid services.
The leading U.S. mobile providers added 1.1 million revenue generating units during the third quarter of 2012, compared to approximately 3.3 million RGUs during the same period of 2011, for example.
Also, U.S. smart phone penetration has reached 60 percent, an important figure because smart phone accounts drive mobile data revenue. As useful as smart phones have been in driving adoption of data services, that growth engine will stall very soon.
Hence the new focus on acquisitions.
Edited by
Alisen Downey 
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