After starting amid the smoldering ruins of AT&T and T-Mobile USA's failed merger, 2012 ended as a big year for mobile carrier deals in the U.S., and possibly a final changing of the guard for a long time.
If all the reshuffling that operators agreed to in 2012 becomes a reality, 2013 will see a competitive second-tier carrier absorbed, the country's struggling No. 3 carrier rescued by a foreign suitor, the world's biggest WiMax operator swallowed up and a venerable brand name banished to the history books.
The complicated U.S. mobile market needs some consolidation in order to keep AT&T and Verizon Wireless in check, according to industry analysts. Their biggest rivals, Sprint Nextel and T-Mobile USA, are now on a path to greater strength that is likely to continue in 2013, and that should be good news for consumers, they said. That's why the Justice Department and Federal Communications Commission are likely to bless carrier consolidation in 2013.
"What all of this is aiming at is strengthening T-Mobile and Sprint," Recon Analytics analyst Roger Entner said. "The FCC is afraid of the two larger carriers being too dominant." AT&T and Verizon, with about 106 million and 96 million subscribers, respectively, far outweigh the smaller players. Sprint has about 56 million subscribers and T-Mobile has about 33 million.
The biggest deals of 2012 came close together: In early October, T-Mobile USA agreed to merge with flat-rate carrier MetroPCS. Just days after, Sprint announced it planned to merge with Japanese carrier Softbank, which would invest a total of US$20 billion and acquire 70 percent of Sprint. Several weeks later, Sprint said it would pay $2.2 billion for the remainder of network partner Clearwire that it doesn't already own.
It's likely that none of those deals will change the average consumer's life much in 2013. T-Mobile plans to keep the MetroPCS brand, at least at first. The merger will help T-Mobile strengthen its network, but not immediately. Sprint will also keep its primary brand and will continue to build out its growing LTE network, while Clearwire's planned LTE deployment will also go forward. Clearwire's system will boost Sprint's service in areas with high demand, but most subscribers won't see that until 2014, when devices that can use both networks are widely available, according to the companies.
But one other change could affect thousands of longtime mobile users, as Sprint plans to fully shut down the former Nextel network by the end of June. That move was planned before the Softbank deal, but the fine print of that agreement brings a symbolic change. In the middle of the year, around the same time that Sprint shuts down the proprietary iDEN system that dates back to the 1990s, Sprint is set to drop the Nextel name as it completes the Softbank merger.
Those may be the last significant shifts in the U.S. mobile market for years, as Sprint gains much-needed financial strength and spectrum, and T-Mobile doubles down on reaching cost-conscious consumers with another major low-price operator under its wing. As the FCC auctions off more spectrum bands in the years to come, the market might be reshaped by new entrants, though much of that spectrum isn't ideal and may just go to supplement existing networks. For now, there simply isn't much more consolidation to do, some analysts said.
The national carriers will continue buying smaller, regional operators for their spectrum licenses, in order to fill out their geographic coverage or their data capacity, Ovum analyst Daryl Schoolar said. This trend is already ongoing and reflects the reality of the mobile industry, which now depends more on having fast, expensive new networks and the latest phones, analysts said. "A small business cannot compete and cannot build a successful wireless network today," Entner said.
Carrier mergers themselves are partly an artifact of the U.S. approach to mobile spectrum licenses, which mostly are allocated for individual markets rather than the country as a whole, Entner said.
In many countries including China, Japan, South Korea, Mexico, and parts of Europe, governments determine the number of national carriers through the number of national licenses they auction or otherwise award.
However, choices in the U.S. market may have to further shrink in the next year or two, some analysts said.
"I think T-Mobile is in the most precarious spot," analyst Jack Gold of J. Gold Associates said. Even with the spectrum it would gain from buying MetroPCS, the company will find it hard to compete with the top two carriers plus a stronger Sprint, he said.
Further consolidation to three carriers may even be inevitable, according to Chetan Sharma, at Chetan Sharma Consulting. He believes T-Mobile will be acquired in the next two years, possibly by a foreign operator or private investment group, but probably by Sprint. Neither of the two ultimately will be able to compete on their own, he said. In other countries where the mobile business is relatively open, such as the U.K., market forces eventually have led to greater consolidation, according to Sharma.
"Every time, in any market, you have multiple operators, they always whittle down to three," Sharma said.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.