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Fri March 22, 2013
How can T-Mobile compete against the big guys? Merge, merge, merge
The merger of Bellevue-based T-Mobile USA and its smaller rival, MetroPCS, has won regulatory approval and will likely move forward. But one analyst says even the combined company may not be large enough to compete with the biggest wireless carriers.
For a mobile phone company, having the biggest, fastest network is what counts, especially as more and more people use smartphones to stream video or listen to Pandora.
Morningstar analyst Allan Nichols says MetroPCS will give T-Mobile a much-needed boost of wireless spectrum as well as faster technology.
But he says it will still be tough for the company to compete against the bigger companies, namely AT&T and Verizon. Nichols says ultimately all the smaller players —Sprint, T-Mobile, MetroPCS, Leap Wireless and U.S. Cellular — should merge into one company.
"You can reduce the amount of real estate you have. You can reduce the amount of management you have. And you stop competing against each other, which, from a consumer’s point of view, may not be so good, but from the profitability of a company, it’s very good," Nichols said.
Still, Nichols says it's unlikely that regulators would approve such a mega-merger.
In the meantime, MetroPCS and T-Mobile are focused on completing their own deal.
MetroPCS shareholders will vote on April 12. Several big investors have said they don’t like the terms and plan to vote against it. Nichols says the opposition is sizeable, but not big enough to scuttle the deal.