Everyone seems to be on board this time. At least at the governmental level. The belief seems to be that merging T-Mobile with AT&T Inc.(NYSE:T) would have been destructive to the industry through putting too much pop under one firm but that merging the #4 and #5 mobile communications providers will promote competitiveness. Interesting definition of competition if you’re a small startup trying to enter the market, I suppose. Then again, that’s a ship that’s likely sailed. Barring some truly deep-pocketed player deciding to enter the market and start purchasing frequencies we’re not likely to see any further entries into the mobile communications market space.
Still, it may be that the merger allows for greater competition when the FCC next auctions off parts of the mobile spectrum. That auction is scheduled for next year sometime – I’m not certain exactly when – and another big player could prevent AT&T Inc.(NYSE:T) and Verizon Communications Inc. (NYSE:VZ) from just hording all of the available spectrum to keep other players out.
There’s more to it than that, of course. The merger combines the customer bases of the two systems along with different ways of leveraging them. If analysts are correct and the idea of subscription-based cell services is losing traction, then the new combined company could find itself positioned on the exact right side of history. With MetroPCS Communications Inc (NYSE:PCS) already strongly committed to the pay-for-time model of mobile communications the two firms stand to gain strongly while the two giants might find themselves sucking wind as customer behavior patterns change under them.
Also not mentioned in this debate is Sprint Nextel Corporation (NYSE:S). Sprint is sitting behind the two monsters in terms of market share and I don’t think the merger will allow T-Mobile/MetroPCS Communications Inc (NYSE:PCS) to surpass it. But it might end up being pretty close after things fall out. Sprint Nextel Corporation (NYSE:S) isn’t in any danger of going away, God knows, but it might end up facing increased pressure after the merger.
Honestly, from the way the governmental spokespersons are talking about this merger, you’d think it was the only thing preventing an apocalyptic monopoly occurring in the mobile industry. It’s like they believe that they have to do something to prevent AT&T and Verizon from going all Cruella de Ville on the smaller players and wearing a long-rider coat made of the skins of T-Mobile subscribers. There’s even talk of limiting the amount of frequencies that the big two are permitted to bid on at the next auction. OK, maybe that’s necessary if they’re just buying them to squat on them, but that’s yet to be determined.
Get me, I’m no big corporatist. Controls on the amount of muscle flexing large companies can do is a good thing. But that’s more a part of anti-trust lawyers and the FTC than everyone else in the world. Approving a merger because it has the ability to block some other company or two from dominating seems somehow against a basic line of reasoning. It’s a sort of governmental version of “let you and him fight!”
Whatever, the merger’s going to go through. It would be a truly monumental task for it to be blocked at this point and that’s very unlikely. So we’ll find ourselves with four major players in the mobile communications market and we will – somehow – muddle through. Best guess is that the vast majority of people won’t see any difference. The increased competition will, hopefully, bring a better need for customer service and price shaving to the market, especially if the trend toward MetroPCS Communications Inc (NYSE:PCS) pre-pay phones continue. That’s the innovation that has a chance of altering the market, not just the merger of two companies.
The article T-Mobile and MetroPCS Merger and the Fight for Subscribers originally appeared on Fool.com and is written by Nate Wooley.
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