For T-Mobile, it is a move necessary to gain traction. For the past three-plus years, the No. 4 carrier in America has made many attempts to bridge the gap. They’ve introduced new plans a number of times — it feels like dozens. They’ve run aggressive marketing campaigns touting the speed of their network. If it’s in the wireless marketing playbook, they’ve tried it. They even ran an end-around play, but still haven’t gained their desired traction.
Yes, they’re the No. 4 carrier in America, but they’re a distant fourth. At 33.9 million subscribers they trail No. 3 Sprint by more than 20 million. At this point in the game, attracting that many subscribers is a nearly impossible task. The bulk would have to come from not only Sprint, but also Verizon and AT&T — both of which boast over 100 million subscribers. But why would more than 20 million subscribers leave these larger, more reliable, and more convenient networks? Such is T-Mobile’s dilemma.
Last year they proposed a solution: a merger with MetroPCS. In the past this might not have worked as well. Before LTE started to cover America, MetroPCS and T-Mobile used different technologies to power their networks. But with converging technologies, the merger is a bit more feasible. Still, it leaves the combined company with a deficit. MetroPCS will add around 9 million subscribers, meaning Sprint will still have a more than 10 million subscriber advantage.
At the same time, Sprint will likely make a move of its own soon enough. After a lucrative buyout offer from Japanese carrier Softbank, Sprint received a competing offer from Dish Network. The latter makes the situation even more interesting, given Dish’s existing wireless holdings and a long-held desire to get into the consumer cellular market. The combined company won’t gain many subscribers over Sprint, but it could breathe new life into a company that hasn’t made much progress in the past few years.
The culture of mergers and acquisitions will likely continue. Spectrum is rare, and even with a spectrum auction in the offing, many carriers will find it more efficient to simply acquire another company’s spectrum and subscribers. We saw this with the spectrum auction in early 2008. Verizon and AT&T were expected to compete for the attractive C block, but Verizon ended up having the run of it because AT&T decided to pursue acquisitions.
There are still a number of smaller and regional carriers that could be acquisition targets in the next year or so:
- Cricket — which was previously an oft-discussed merger partner with MetroPCS
- US Cellular
- Cincinnati Bell
- C Spire (Cellular South)
- SouthernLINC
- Various Cellular One holdings
Not all of these entities are publicly held, so mergers can become a bit more complicated. But given the need to pick up new spectrum and subscribers, the larger carriers could find it worth their while.
In other words, T-Mobile and MetroPCS could be just the start. Sprint is likely to go next. Will any other carriers combine and consolidate in order to keep up with the wireless giants?
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