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June 17, 2013

More Signs of Coming Communications Consolidation Wave

Verizon, and possibly AT&T, Vodafone and Telenor, are among the firms that might try to buy into the Canadian mobile market

In the U.S. market, there is certain to be some change for Sprint, Clearwire and probably T-Mobile USA as well, depending on the outcome of SoftBank and Dish Network bids for Sprint and Sprint and Dish Network bids for Clearwire.

The European Union is pushing to create something closer to a “single market” within the European Community, a move that most believe will lead to massive consolidation in the EU telecom business, something service providers have been calling for, and which regulators at the EC seem to agree is needed, in 2014 or 2015.

With more than 1,200 fixed network operators and almost 100 mobile networks, most operating with less than optimal economies of scale, EC operators argue it is not possible to create viable long-term businesses unless cross-border acquisitions and mergers are permitted and even encouraged.

The "name of the game in the cable business is scale," Liberty Media Chairman John Malone says, referring to the need for yet another wave of consolidation in the U.S. cable business.

Mergers and acquisitions in the regional fiber market and competitive local exchange  business have continued at a relatively steady and more quiet level for some years, and some would argue a consolidation wave in the rural telephone business is inevitable as well.

The issue is whether “horizontal” mergers, intended to create larger entities, will occur within existing markets, or outside them. The answer hinges on a combination of growth prospects and capabilities within market segments.

The largest tier-one service providers in developed markets generally will find the prospects more attractive outside their home markets, since prospects for growth internally will be rather slight.

It will be easier to buy growth outside their existing markets.

Smaller providers will not generally find international expansion feasible or desirable, and will therefore concentrate on expansion within a single national market.

In both cases, though, the business imperative is quite similar. To compensate for slower organic growth opportunities in markets that are saturated and mature, service providers will buy growth in additional markets.




Edited by Jamie Epstein


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