The outcome of the bidding for Sprint is not yet concluded, but it might not be incorrect to suggest that whether Dish Network or SoftBank wins Sprint, there is potential for a disruption of the U.S. mobile market. If Dish wins Sprint, the attack is more likely to take longer to develop.
Dish would immediately create bundles (Sprint voice and data with Dish video). But the big changes would come later, when the video portion of the bundle shifts from satellite to mobile delivery. But that would take time.
If SoftBank wins Sprint, the assault would come quicker. While SoftBank would aim to leverage new services and applications, as it did in the Japanese market, SoftBank also might launch a disruptive assault on retail pricing and packaging, as it also did in Japan.
How much the assault would resemble what Illiad’s “Free” has done in the French market is unclear. But Free’s attack, squarely on disruptive levels of value and retail pricing, has allowed it to grab nine percent market share in about 15 months.
Iliad offers users unlimited calling (domestic) and 3 gigabytes of data for EUR20 per month, prices that have proven attractive enough to entice nine percent of French consumers to change providers.
To be sure, European mobile revenue has been under pressure since at least 2007. In part, that is because mobile data revenue has so far failed to compensate for the sharp decline in mobile voice revenue, according to Wireless Intelligence research.
That study found mobile average revenue per user had fallen by 20 percent between 2007 and 2010, dropping from EUR25 in 2007 to EUR20 in 2010 on average.
A major reason is a decline in the average per-minute price for voice calls, which dropped from EUR0.16 to EUR0.14 in the EU27 mobile markets over the period. France has been particularly affected, one might argue, because of the new level of competition.
SFR in the first quarter of 2013 suffered an 11 percent year-over-year revenue decline, as it faces the second year of price competition with Free, the upstart mobile operation owned by Illiad.
Orange recently reported an 8.1 percent fall in first-quarter 2013 revenue.
In the 15 months since its launch, Free has secured around nine percent of the French mobile customer base.
Illiad Group, parent company of Free Mobile, said that sales in its mobile business had increased by 202 per cent to €294.5 million from €97.5 million, with the company adding 870,000 mobile subscribers during the first quarter to take its total to 6.08 million.
EU27: Average Revenue Per User (ARPU) 2007-2010
Source: Wireless Intelligence
And, as competition in the French market has at least one of the three leading providers looking for some way to merge with another entity to strengthen its position, a SoftBank assault could spur more thinking about market structure. In France, the thinking is that four providers probably cannot survive, even if French regulators say that is a minimum number of providers necessary to preserve competition.
In the United States, where regulators and antitrust officials likewise have suggested that four is the minimum number of providers necessary to ensure robust competition, a disruptive price assault by SoftBank would challenge those notions.
As the Broadband Availability Gap study suggested, a three-competitor market reduces ISP average revenue per user by 28 percent, and take rates by 75 percent. And the four-leader U.S. market has impact arguably more severe than that.
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