The main topic of discussion in the mobile industry’s largest annual gathering, CTIA, next week will be the consolidation of service providers to deal with the increasing demand for services like video streaming and social networking that take up a lot of bandwidth. But an effective solution to such issues might have to wait due to regulators’ disapproval of large acquisitions. An example of this would be AT&T’s plan to buy T-Mobile, which was scrapped last year. Instead, AT&T had to pay a huge break-up package to T-Mobile that pushed it to a $6.7 billion quarterly loss. However, the lack of airwaves is apparent and companies are acting with caution ever since on acquisition related issues.
Analysts say that regulations could change once Federal Communications Commissions chairman Julius Genachowski steps down. Genachowski failed to comment on his 2013 plan so until then most analysts predict that carriers and providers will avoid mergers or large acquisitions.
A matter of concern to providers is the regulators highlighting that the US needs at least four operators to maintain healthy competition in the industry, a number that is an obstacle to the merging of Sprint Nextel and T-Mobile. Other possible deals include one between Leap Wireless and MetroPCS Communications, which is expected to happen soon. Sprint Nextel Chief Executive Dan Hesse, who opposed the T-Mobile acquisition, is in support of the coming together of smaller companies. He further believes that this is an uncertain time to make predictions.
Though such acquisitions are a simple matter in theory as customers would not be changing hands, it is unclear how much spectrum would be available for sale, like in the case of Verizon Wireless’ deal to buy spectrum from cable companies that other providers are competing for as well. Another uncertainty is Dish Networks’ wish to use its spectrum for cellular services alone as opposed to both satellite and cellular services, for which it has sought permission from the FCC.
Bernstein analyst Craig Moffett believes that a consensus between service providers cannot be arrived at until they know for sure how much spectrum will become available in government auctions. He also believes that spectrum rules are about to change drastically and that the FCC will establish clearer rules on ownership on reviewing the Verizon Wireless deal. Analysts believe that uncertainties will cause vendors to promote existing technology that support current wireless network capacities.
