This is how the news appears this week. Please delete as appropriate.
US MNO Sprint/T-Mobile/satellite TV player Dish
will likely be acquired by
overseas/US network providers
soon/tomorrow/ next year
because the new president-elect is not bothered/busy/against net neutrality/ in favor or mergers/hates regulators.
The single truth is that this MAY all be true, but we’ll only know for sure after Donald Trump has appointed new members to the Supreme Court/ changed the FCC chairman/ changed the Free Trade Commission chairman/ appointed a new attorney general/ submitted and gained approval for a budget/ and has completed his own key agenda items.
Most writers are looking at the appointments which Trump is preparing in his transition phase and then looking at the likely sympathies which this appointee has shown in the past.
Certainly, some positions are supposed to work that way, but in truth the set-up interviews and those with the Senate, are likely to establish what they have in common, which parts of their own agenda is fine to go ahead with, and what Trump wants to see. In most instances, it will likely be a combined agenda.
In such an instance, when a leader is not immersed in the policy of his party, his first actions are more important than the words of the past, and the decision around the proposed AT&T/Time Warner acquisition is the one to watch. If it is positive, then all hell will break loose, and if it is blocked, then none of the above stories will fly.
But it remains true that, historically, the best time to put through a merger is at the beginning of a Republican president’s first term.
This week’s top merger story is about what SoftBank might have to pay in order to acquire T-Mobile. Deutsche Telekom just got through saying that that T-Mobile USA is NO LONGER up for sale? Which is usually taken to read, ‘only for a high price’. But US analysts have characterized this as ‘President Obama blocked those deals, so they will automatically come back onto the table’.
The fact that Trump has drawn out a promise from SoftBank to invest $50bn in the US and create 50,000 jobs is perhaps the motivation behind this story.
The truth is that once the US is down to three MNOs, it will be impossible to reverse that decision and it’s a big call for Sprint to buy T-Mobile. It would mirror the situation in Japan, Germany and China, but not many other large countries. It would be far easier for regulators if an outside party like Dish, or a consortium led by a player like Altice, or even Google, were to buy T-Mobile USA, because there would still be four competing players (even if the competition between MNOs is no longer the deciding factor in assessing the balance of power in a market, since mobile, fixed broadband, TV and web content increasingly need to be considered altogether. However, most regulators have not caught up to this thinking yet, as the UK’s decision to allow the BT/EE merger, but not that of Hutchison Three and Telefonica O2, both MNOs, showed.)
It has to be said, that everyone, including investors, in the US are thinking the same way. As of last Thursda, Sprint’s stock was up 31% and T-Mobile’s 11% since the election. But the higher these prices rise on the back of speculation that these deals are now unblocked, then the harder they are to do financially – because the price goes sky high.
T-Mobile is now seen as costing far more than the $39bn that AT&T offered for it in 2011, but on the other hand it only had 33.7m subscribers at the time, and it has risen to 67.4m. And Sprint in particular has less of a chance to buy it, saddled with debt, and with its parent Softbank having also just digested processor IP designer ARM.
The truth is that US and global operators are consolidating – and this is a natural process as margins fall over time. In the US, they also consolidated under Obama, with some deals blocked, and they are unlikely to consolidate any slower under Trump but much of the work may already be done. But most deals are either across markets – i.e. cellular buys fixed line, or they are regional, Charter, Time Warner Cable – and because of a lack of overbuilding in the US, all cable is regional in nature.
Few have led to a reduction in the number of competing players in any given region – and the only reason to allow the merger of Sprint and T-Mobile is to let a third operator take on the scale of AT&T and Verizon, so they may better compete.
Pay-TV operators now want to be fixed line and MNO operators and that DTH players seek to acquire a return path by either fixed lines or wireless. And all of them want to own content, to bolster their unique service offering. So expect more content companies to come up for grabs in this equation, than cellular operators.