T-Mobile US and Sprint are in More Trouble Than Some Think

We typically look at the U.S. mobile market in terms of subscribers and revenues. But that might provide a less-robust estimation of the positions of market leaders than one might suppose.

For example, whether one measures by revenue or subscribers, AT&T Mobility and Verizon Wireless represent about 61 percent of all share in the U.S. mobile business. Between them, Sprint and T-Mobile US have about 30 percent share of subscribers.

But gross revenue and subscriber counts are only part of the story. Profits (earnings before interest, taxes, depreciation and amortization) tell another story.

Sprint lost money in 2013. T-Mobile US had about $5.3 billion in earnings before interest, taxes, depreciation and amortization, in 2013.

But AT&T had 2013 mobile segment EBITDA of $25.4 billion. Verizon had mobile segment earnings of $34 billion.

In other words, AT&T and Verizon had 92 percent of earnings among the top four U.S. mobile providers (excluding all profit from AT&T and Verizon fixed network services).

The point is that no matter how one views the desirability of Sprint and T-Mobile US merging, the smaller carriers are dangerously far behind the leaders in terms of profitability.

And if you believe market share and profitability tend to be correlated, that means big trouble for both Sprint and T-Mobile US, over the long term.