After Comcast, AT&T and Sprint Moves, Even More Big Deals are Coming
Ironically enough, Sprint’s main competitors are going to make it easier to convince regulators that its acquisition of T-Mobile US should be approved. For the simple matter is that a major change in U.S. communications market structure is building.
Sprint Corp. plans to make a bid for T-Mobile US as soon as June or July 2014, Bloomberg reports. Many considered that a questionable possibility. But action by other contestants now makes possible an argument that the Sprint deal is only a smaller part of a wider consolidation.
And that will improve Sprint’s chances of winning approval. That isn’t to say it will be easy. But such a bid clearly will be situated differently now that other contestants are moving to consolidate market share as well.
AT&T has approached DirecTV about a purchase. And Comcast wants to buy Time Warner Cable.
If all those possible deals become actual offers, Dish Network is certain to move on its own to find a merger partner as well, as Dish needs to bulk up as its core video entertainment business slows and eventually shrinks, and also needs to find a partner to help it build its new mobile network.
With all of that happening, the Sprint deal to buy T-Mobile US looks less challenging, from a regulatory perspective.
Earlier, it had appeared that Sprint would argue that competition in the U.S. mobile market would be enhanced if Sprint could gain scale by acquiring T-Mobile US. Though Sprint will make that argument, it now has a wider argument, namely that the whole U.S. communications and triple-play market is consolidating in a major way, making its purchase of T-Mobile US less significant than it might otherwise have been.
AT&T, by acquiring DirecTV, would for the first time become a national retailer of video entertainment.
That would not directly help AT&T compete with cable TV companies in the high speed access business, but certainly would add key revenues that would support the investment in higher-speed Internet access capabilities, as AT&T has said it now will do.
Sprint likely will argue it will use the greater scale, after a T-Mobile US acquisition, to use much of its Clearwire spectrum--as orginally was Clearwire’s business model--to support fixed high speed access, adding another competitor to the fixed network high speed access business in many markets.
To be sure, regulators are likely to worry more about the impact of all the mergers on high speed access competition, not consolidation in the video entertainment services segment of the market.
So both AT&T and Sprint are likely to emphasize the ways their proposed mergers would do so.
And more is coming.
With the possibility of a merger with DirecTV off the table, Dish Network would face much more pressure to link up with a firm that could help it build its mobile communications network and help Dish escape being a “satellite-only” communications provider.
Which specific partners might be involved is yet to be determined. But Dish almost has to make a move to keep up.
Verizon would be the only national service provider that was not involved in a major deal to gain scale, but Verizon has not be thought the best fit for Dish, and Verizon also would face more scrutiny on the spectrum front, as would AT&T, if it had decided to make an effort to acquire Dish Network.
Though many have argued both Dish and DirecTV eventually would be bought by one or more of the U.S. telcos, many had argued Dish would be more valuable for AT&T, because of Dish’s mobile spectrum holdings.
And though the most likely scenarios involve a Dish deal with another access provider, particularly a service provider with core interests in the mobile market, it is conceivable a non-traditional provider with lots of spare cash might decide it is time to make a bold move as well.
Dish has a fair amount of spectrum and no network. But Sprint has designed its own network to accommodate wholesale access by third parties with their own spectrum resources. So it always is possible a Dish asset buyer could turn to Sprint to launch a new network.
Sprint’s big gamble on T-Mobile US just might face fewer obstacles than once feared. With all the other activity, Sprint can argue the merger with T-Mobile takes place within an already consolidating industry.
And the potential turmoil might provide just the opening a new entrant could play to advantage. With the increasing consolidation, a new facilities-based contestant would be viewed as a counterweight to the heft the legacy players are acquiring.
Such market-transforming deals often occur in pairs or trios, the reason being that big deals often are easier to pursue when other big deals also are being considered by regulatory authorities.
Conversely, it often is considered more difficult to pursue follow-on mergers once a big deal has happened, for the simple reason that markets have become more concentrated.
In this case, other contestants would be right to view major moves as easier to accomplish now, rather than waiting for all the other deals to be reviewed and possibly completed.
So watch for more big deals to be attempted.