The show floor at Mobile World Congress last week was all about next-generation technologies, but the buzz on the sidelines largely centered on potential consolidation in the U.S. wireless market.
“Recent comments from SoftBank, T-Mobile and Verizon continued to fuel merger speculation as the U.S. M&A dance was the most important sideshow of MWC,” Amir Rozwadowski of Barclays wrote in a research note. “Most vendors are waiting to see what takes place as various deals have clearly different implications.”
Indeed, a deal between existing service providers could reduce the number of major U.S. carriers from four to three, which would almost surely have a negative impact on the tower market. Conversely, a tie-up between an existing service provider and a newcomer could increase competition in a market that has become cutthroat.
While AT&T dropped a bombshell late last year with its proposed acquisition of Time Warner for $85 billion, M&A activity in wireless has been muted during the FCC’s incentive auction of 600 MHz spectrum. The auction is slated to wrap up in the next several weeks, though, and analysts generally expect to see a much more activity once it is concluded.
And speculation has increased with the election of Donald Trump, whose administration is widely expected to demonstrate a much lighter regulatory touch than that of Barack Obama. Indeed, new FCC Chairman Ajit Pai said recently he doesn’t expect his agency to review AT&T’s proposed acquisition of Time Warner.
That speculation has been particularly focused on a potential tie-up between the nation’s two smallest major carriers. SoftBank spent more than $20 billion to acquire controlling interest in Sprint in 2012, and the Japanese company had initially hoped to acquire T-Mobile as well and merge the carriers to take on Verizon and AT&T, SoftBank CEO Masayoshi Son noted earlier this month. That effort was dropped when U.S. regulators indicated they were opposed to a merger, however.
Many analysts remain skeptical of a merger between T-Mobile and Sprint, however, due to both financial hurdles and regulatory concerns.
There’s no shortage of other potential deals, however. Dish Network remains a prime target due to its significant spectrum holdings and desire to enter the wireless market, and cable companies Comcast or Charter could look to partner with an existing carrier to join the fray.
“While we believe industry consolidation in some form is a necessity, we never expected a Dish transaction in calendar year 2016,” Jefferies analysts wrote in November. “We remain convinced that Dish will play a vital role in industry consolidation, but there is plenty of time for optionality to shake our irrespective of when the auction closes.”