Consolidation: The Wireless Way

Wireless news has been pretty slow as 2002 comes to a close. So what can we expect in 2003? One of the most speculated topics in 2002 was a new wave of US wireless carrier consolidation driven by an increasingly saturated market and the January 2003 lifting of spectrum caps. VoiceStream/T-Mobile was at the heart of the speculation when rumors about discussions with AT&T and Cingular surfaced. If any of these rumors pan out what would the resulting company look like? That question is probably what's holding up the deals. Booz Allen has published some interesting consolidation scenarios that hint at what we might see in 2003. Booz suggests two paths for merged players to realize economies of scale. In the first scenario Carrier A absorbs smaller Carrier B and transitions their customers to Carrier A's network and billing system. Over time the A can redeploy B's assets to supplement its network capcity. This plan allows the merged entity to have one platform and avoid the costs of combining or maintaining multiple platforms. This seems a bit tricky if the point of the merger is to gain spectrum because that implies the aquiring carrier is strapped. By adding the acquired carrier to an already at-capacity network risks mass exodous. The second scenario suggests that the merged carriers don't try to blend systems but maintain each network and market them as seperate product lines. Each set of assets is packaged and offered based on its product features. Booz believes this scenario has a quicker pay off. What we found intereting is how well this scenario maps to US carriers. For example Cingular has wide coverage but a weak data strategy and needs spectrum. T-Mobile has capacity, a clear data strategy but less coverage. The two carriers could merge and make modest modifications so their service offerings addressed distinct market segments and didn't directly compete with each other. If you stick along technology lines, Verizon could merge with Sprint and AT&T could merge with Nextel. At the most we predict that only such merger can happen in 2003.

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