No Consolidation Among Top-4 Mobile Operators is Possible; One Has to Fail
Even if one argues a four-provider U.S. mobile market is not sustainable, U.S. regulators have ruled out any consolidation among the top four suppliers. That means the market cannot consolidate to three strong providers by means of mergers among the contestants.
That leaves only one solution: one of the firms, or perhaps even a couple, would have to be so weakened that the top ranks shrink naturally to two or three providers, with a distant number four unable to keep up. Failure, in other words, is the only way the U.S. mobile market is going to consolidate.
That appears not to be the case in the video market.
Even 20 years ago it would have been possible to predict that, ultimately, both DirecTV and Dish Network would cease to be operating entities, and would have been acquired or merged with another entity. The logical candidates always have been Verizon and AT&T.
Now that AT&T has made the move to acquire DirecTV, half the prediction seems likely to be fulfilled. The issue now is what happens with Dish Network. Verizon likely has little interest, as Verizon thinks linear video is going to decline rather quickly.
That makes Dish Network exit options tougher. It never has seemed likely any cable TV operator would see the logic of acquiring Dish Network or DirecTV. If Verizon isn’t interested, the pool of buyers gets very thin, one might argue.
Likewise, some have argued that, long term, the U.S. mobile market simply cannot support four major national suppliers. But it is hard to see, at the moment, how that consolidation would happen.
In fact, the only scenario that would reduce immediately and clearly reduce the number of suppliers is the one development regulators will not presently support: Sprint merging with T-Mobile US, or either AT&T or Verizon buying T-Mobile US or Sprint.
In other words, none of the four leading national providers will be allowed to merge. That doesn’t mean there will not be acquisitions; there simply won’t be any mergers of the top four firms.
“I have always said on consolidation, it’s not a matter of if it’s when and how and now I’m going to add and who, because I think as we think ahead you need to think I still reiterate that in five years we will think it comical that we thought about the industry structure as the four major wireless carriers,” said T-Mobile US CEO John Legere. “So I think you need to think about the cable industry and players like us as not competitors but potential partners and alternatives for each other in the future.”
That would not necessarily reduce the number of providers from four to three, as a firm such as Comcast would still remain in the market. But a Comcast acquisition of either T-Mobile US or Sprint would give the acquired company the heft to secure its number three spot in the market on a long-term basis.
On the other hand, it always is possible that Dish Network might also try to acquire T-Mobile US, to transform itself. That likewise would not immediately reduce the number of leading mobile providers.
So, like it or not, no consolidation of the U.S. mobile market is possible by means of any mergers among the top four providers.
Instead, one of the firms would have to be weakened so much that it essentially drops from contention. Weakened sufficiently, the number-four provider might well be acquired by a firm that has a different business model, and essentially does not compete directly with the leading three providers.