Wednesday, February 5, 2020

U.S. Mobile Market Share is Unstable, With or Without T-Mobile US Merger with Sprint

Market share in the U.S. mobile market has in many past years depended partly on whether one counted subscribers or revenue. In 2019 AT&T was biggest, measured by accounts. In the past, in some years Verizon was biggest if one measured by revenue

By 2018, AT&T arguably was the leader in both revenue and subscribers. 

This look a 2018 revenue shows AT&T leading in revenue and subscribers, overall.

One could make an argument that Verizon lead in postpaid accounts, though. 


Perhaps ironically, whether the T-Mobile US merger with Sprint is approved or denied, U.S. mobile market structure will remain unsettled and open to share changes of some size. The reason is that, longer term, markets tend to take an unequal share distribution. 

With or without a T-Mobile merger with Sprint, U.S. market structure is unstable, using some classic rules of thumb. Heavily capital intensive industries serving mass markets often take an oligopolistic shape, if not a monopolistic shape. 

At best, only a few firms are sustainable. 

Most stable markets are led by a few firms. In fact, many stable markets take a particular shape. As the PIMS database suggests, a stable industry structure eventually tends to take a shape where the number-two provider has half the share of the leader, while the number-three provider has share half that of number two. 

That tends to produce a market share distribution of something like 4:2:1. So far, that tends to be true for physical industries that are asset heavy as well as internet and applications businesses that are asset light. That might be why it so often seems to be the case that a market follows a rule of three

More importantly, in many markets, just two firms have 80 percent of profits

So with, or without, a merger of T-Mobile US with Sprint, the U.S. mobile market would have an uncomfortably unusual market structure. The gap between AT&T and Verizon is not wide enough to be stable, for example. 

When the market structure 4:2:1 or something close to it prevails, competitors two or three do not have incentives to launch price attacks against the market leader, as the leader has the resources and incentive to do whatever is required to beat back a price attack. 

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