The Wireless Industry – Here We Shrink Again!

By Dawood Khan

Red Mobile Consulting, Toronto, Canada

TORONTO – Consolidation seems to be the global trend in the wireless carrier sector today. A combination of full or near-full market penetration rates; burgeoning consumer appetite for data services leading to pressure on spectrum; and the need for carriers to save costs in light of declining service revenues are all leading to the phenomenon. While acquisition activity is reducing the number of competitive players in the market, leading to better economies of scale and greater access to spectrum for carriers, regulators fear this resulting in increased pricing for consumers.

AT&T $1.2 billion bid for Leap Wireless’ 5 million pre-paid subscribers and PCS and AWS spectrum spanning 35 states is just the latest in a series of acquisition activity. T-Mobile, who recently acquired MetroPCS – competitor to Leap, is itself a potential target for takeover, with Sprint (anti-trust regulation permitting) pegged as a suitor.  This comes on the heels of Sprint’s recent acquisition of the remaining part of Clearwire, allowing it access to spectrum to offload broadband data, as Clearwire pursues deployment of its TD-LTE network.

According to the GSMA, recent consolidation activity in Ireland and Austria have given concern to regulators that these acquisitions not lead to reduced network investment or increase in consumer prices.

Canada has its own share of consolidation activity in the air, albeit at much smaller scale. Verizon’s potential entry into the Canadian market given recent rules allowing foreign firms to acquire Telcos with less than 10-percent market share, can lead to competitors Wind Mobile and Mobilicity coming under the Verizon umbrella. In the upcoming 700MHz spectrum auction, rules that favour new entrants which allow them to purchase twice as much spectrum at a fraction of the price will be in Verizon’s favour. Furthermore, the Canadian market is still growing. According to a Red Mobile Consulting report for Industry Canada – “Study of Future Demand for Radio Spectrum in Canada 2011-2015,” Canadian subscriptions are expected to grow from approximately 30 million to 35 million by 2015, leading to full market penetration.

Consolidation Now – What’s Next?

As carriers role out their LTE networks, the ability to actively share network assets including the base station, the radio front-ends, antennas can make the deployment of new networks much more economical and practical for carriers. In Canada, Bell and TELUS already share network access as part of a roaming arrangement, in addition to sharing towers and cell sites. Network sharing with LTE can enable carriers to provide access to customers of another carrier on that carrier’s spectrum through a common shared network.

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