Tuesday, February 7, 2017

3 or 4 for U.S. Mobile Market? Answer Might Still be "4"

The optimal mobile market structure for any national mobile market  remains an open question. Some believe most markets balance consumer welfare and supplier sustainability better with three leading suppliers rather than four, but regulators in many markets continue to believe that four suppliers are necessary for robust competition.

Indeed, most financial analysts likely agree that three suppliers in the U.S. market, for example, would be better for suppliers. Were T-Mobile US and Sprint to combine, three roughly-equal firms would lead the market.

Under that structure, the fierce pricing wars would abate, many believe, while allowing Sprint and T-Mobile US to attain better scale economics. At the same time, many believe, AT&T and Verizon revenues and profits also would improve.

Of course, all such assumptions are just that: assumptions. What has to be considered is that Comcast and Charter Communications also are entering the market. So no matter what happens with mobile service provider consolidation, at least two potentially-powerful new contestants will be entering the market.

Some believe regulators and antitrust officials will have key problems with market share, were Sprint and T-Mobile to try a merger, as they have in the past concluded. Though many believe it will be easier to gain approval under the new administration, the international tests of market concentration are what they are, and antitrust officials still will be using those tools.

In fact, a horizontal merger might not even wind up being the key transaction to be weighed. Vertical mergers or acquisitions (cable plus mobile, for example) are equally likely.

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