The infamous rumor mill was rampant last week with continuing industry merger and consolidation scenarios and various analysts, media outlets and market watchers making suggestions for the next billion-dollar buy.
First there were predictions that Vodafone Group could still make a play for either Sprint PCS or Nextel. Then a suggestion that T-Mobile could enter a counter offer for Nextel. The Sprint/Nextel speculation was joined with forecasts of a union between two completely separate carriers, like Verizon Wireless and Alltel. U.S. Cellular was mentioned as an acquisition target in some scenarios.
Everyone has a theory. My theory is that the holidays mean less tangible news so the media and analysts have more time to play “What if?”
Of course, more deals are certainly a possibility. Vodafone’s always aggressive, and a counter offer for an already-spoken-for Nextel or Sprint wouldn’t be a huge leap, especially considering its less-than-cozy relationship with Verizon Wireless.
I think it’s highly likely 2005 will bring more regional and rural carrier consolidation, but I’m not convinced there will be less than four big players in the short term.
Regulators are the main hurdle to more consolidation beyond the currently scheduled four large carriers. Would the government allow any less competition, especially in such a short time frame? Consumer groups would certainly be in an uproar.
And then there’s the shareholder issue. Would investors, many of whom are just becoming somewhat comfortable in the telecom industry again after a mass exodus a few years ago, stand for more spending? The merger-and-acquisition mania of the late 1990s is still fresh in shareholders’ minds. The financial community likes less competition, but not at any price.
Moreover, Verizon has comfortable spectrum and customer positions without a big-ticket purchase. And T-Mobile’s network integration with Nextel would be thorny at best.
But then again, ’tis the season of overspending and stories just beyond the believable.
