Feature Article

September 06, 2013

Major Mobile Carrier Merger Wave is Finished, Says Fitch

How much more consolidation can happen in the U.S. mobile industry? Not much, according to Fitch Ratings. The issue is that the largest four wireless operators in the United States, assuming the pending acquisitions pass regulatory scrutiny, now account for nearly 92 percent of total U.S. mobile subscribers, according to Fitch Ratings.

In other words, should all the remaining regional players be purchased, the total change would be just eight percent market share, across the landscape of the four national carriers. Some would say the biggest possible merger would be between T-Mobile US and Sprint, the number four and number three carriers in terms of market share.

Fitch does not see that happening: “We expect only modest consolidation going forward as few material targets remain when operators and spectrum holdings are considered.”

Fitch believes it is virtually certain that the Federal Communications Commission would oppose any consolidation among the top four U.S. mobile operators. In fighting the AT&T purchase of T-Mobile USA, anti-trust attorneys noted that the U.S. market already is far too concentrated.

Though the merger of AT&T and T-Mobile USA might conceptually be viewed differently than a combination of the number three and number four providers to create three contestants of roughly equal size, many have noted that the argument against AT&T’s purchase of T-Mobile USA suggests the U.S. Justice Department also would frown on such a deal.

So if the four leading firms cannot merger with each other, what is left? It’s a no-brainer that the regional players would eventually be taken out, for incremental growth.

“The long-term future for regional or small wireless operators is uncertain at best,” Fitch says.  “Fitch believes that these operators will eventually be acquired by larger wireless operators.”

But none of those deals alone will change existing market share very much. There is, after all, only eight percent share held by all the other mobile service providers other than the big four.

But there are other deals many expect to see. Dish Network, for example, owns valuable Long Term Evolution spectrum, but the value of that spectrum vaporizes unless Dish Network can get its network built by FCC deadlines.

Few believe Dish can do so without taking on a major mobile partner, one way or the other. That suggests either a major alliance with one of the four national carriers, or an absorption of Dish by one of the four.

Many expect T-Mobile US or AT&T logical candidates for such a deal. AT&T has been a rumored buyer of Dish for years, in fact. At this point, all the mobile service providers will have made a fundamental decision about whether they are buyers or sellers. Undoubtedly, Dish also has made such a decision, whatever its public statements.

Though consolidation in the communications business will continue, Fitch suggests the big wave of national and large regional provider mergers is over, in the domestic U.S. mobile business, for the time being.




Edited by Alisen Downey


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