Feature Article

March 06, 2014

Like it or Not, French and U.S. Mobile Markets Eventually Will Shrink from 4 to 3 Leading Providers

Regulators in the United States and France will have much to say about mobile market structure in their countries, as proposed mergers are sought by contestants in both markets. In both nations, the key issue for regulators is the impact of a change in market structure from four leading providers to just three.

Though it seems increasingly likely that strong regulator opposition will dissuade Sprint from making a bid to buy T-Mobile US, in France mobile service provider Vivendi has received two bids for SFR, France’s second largest operator.

Bouygues is one of the bidders, and a win by Bouygues would reduce the number of leading mobile providers in France from four to three. Though the competitive situation in France is more intense than in the United States, the dynamics are comparable in a strategic sense. In France, Free Mobile is attacking the structure of prices and value, with obvious success.

In fact, Illiad’s Free Mobile managed to grab about five percent mobile market share in just six months. SoftBank likewise rapidly gained share in the Japanese mobile market after it bought Vodafone’s Japan assets.

In both those cases, attacking carriers gained share by offering significantly better prices, though each service provider arguably also changed the value part of the proposition.

In the U.S. market, the issue is whether antitrust and communications regulators would allow Sprint and T-Mobile US assets to be combined. Were that combination to occur, the number of leading competitors would shrink from four to three.

At least for the moment, that prospect seems increasingly unlikely. Some observers, though, think an eventual reduction to three major providers in both the French and U.S. markets is inevitable.

The only issue is whether such a consolidation occurs sooner, when the merging carriers are stronger, or later, when the merging carriers are weaker.

That paradoxical conclusion is driven simply by the history of market dynamics in industries that slowly are contracting. Consolidation always happens in markets that are contracting.

Though the U.S. mobile market is not yet doing so, some believe it is only a matter of time. Indeed, some forecast that U.S. mobile revenue will begin contracting in 2018. The mobile market in western Europe already is contracting. 

Edited by Cassandra Tucker

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