Small operator death knell

 

Small operator death knell 
Over the past few months we've seen a flurry of operator acquisitions. Some were quite small such as Leap buying Hargray [1] Wireless for $30 million and Verizon Wireless snapping up Ramcell [2] for an undisclosed amount. Others were more substantial such as AT&T acquiring Dobson [3] Communications for $2.8 billion, Verizon buying Rural Cellular Corp. [4] for $2.67 billion and T-Mobile USA snapping up SunCom [5] Wireless for $2.4 billion. 

Just last week AT&T purchased the remaining stake in Edge Wireless [6], a long-time AT&T affiliate with about 172,000 subscribers in several markets in the Pacific Northwest. The amount of the acquisition wasn't disclosed yet. The deal is expected to close in 2008.

It's clear that building a bigger footprint is the basis for this buying spree among the large operators. As penetration rates climb, operators have to expand their footprint into rural and suburban markets to maintain their growth.

These acquisitions also eliminate roaming fees and reduce operating costs. It's more economical for a large operator to deploy new technologies in rural markets than for small operators with tiny footprints and less buying power. It's also tough for small operators to get the latest handsets from the manufacturers. Small operators don't have the buying power or the volume to cut exclusive deals with handset makers so they are often left with last-year's handset models.

Nevertheless I'm saddened by this trend. Many small operators are more entrepreneurial and innovative than their larger counterparts. For example, Kentucky-based Bluegrass Cellular offered push-to-talk and multimedia messaging before many of its larger counterparts. Midwest Wireless (before it was acquired by Alltel) experimented with a fixed wireless offering that competed with DSL and cable-modem service providers. Others, such as Cellular South differentiate themselves from their Tier 1 competitors by offering stellar customer service and strong ties to the community.

For vendors this trend means fewer customers to buy their equipment. Obviously if you're a vendor with a Tier 1 customer base, this isn't a problem. But for smaller vendors the Tier 3 carriers offer them a chance to get a foothold in the market.

I hope some small operators are able to survive this acquisition trend. Without them, I think this market is much less dynamic. -Sue [7]