A study by GSMA Intelligence might be useful, in terms of looking at firm sustainability and competition, after the merger or T-Mobile US and Sprint. A key argument in the debate over the merger of T-Mobile US and Sprint was its impact on competition and consumer welfare (prices being the measure).
On one hand, some proponents argued that the merger would allow T-Mobile to compete and invest on more-equal terms with AT&T and Verizon.
Opponents argued that consumer welfare would essentially suffer, as the lessened competition would lead to less pricing pressure. It might be noted that virtually every equity analyst I have encountered believed the merger would lead to less pricing pressure in the U.S. mobile market.
But the GSMA Intelligence data are mixed. Since 2013, in European markets, average mobile internet prices per megabyte have been the same, in both four-provider and three-provider markets.
In other words, it is not clear that three-provider markets lead to higher prices, or that four-provider markets lead to lower prices. Also, it is not clear that competition, per se, has had the largest impact on falling prices. The GSMA study shows that per-megabyte prices were higher in the four-provider countries to begin with. In 2012, the three-provider markets had lower per-megabyte prices.
The possibility therefore exists that something other than the number of competitors accounts for average prices.
Likewise, average revenue per user fell at nearly the same amounts between 2011 and 2018, whether there were three or four competitors.
Also, there seems to be very little difference between bandwidth increases in markets lead by three or four contestants.
The GSMA Intelligence study suggests it is likely that profit margins will be higher for the three remaining national leaders, as profit margins in European “three-provider” markets have been consistently higher than in “four-provider” markets. That is what one would expect.
Perhaps some of these same trends will be seen in the U.S. market, once the T-Mobile merger with Sprint has time to be consolidated.
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