The Mobile Merger Domino Effect
By Jeff Kagan
May 26, 2011
If it happens at all, AT&T's purchase of
T-Mobile won't happen in a vacuum. One thing
always leads to another -- and often unexpected
-- series of events. One strong possibility is
that CenturyLink will jump in and acquire
Sprint. Would this be good or bad for customers,
investors, partners and workers?
The wireless and wire line telecom industry is
changing, again. Remember a decade ago, when we
had long-distance companies? Then the
long-distance giants were acquired by the baby
bells. Next, the baby bells merged into three.
Then the wireless industry merged its way down
to a handful of giants.
what's next? We are watching the next wave of industry-reshaping
events setting themselves up. Let's take a look. When this is
done, the industry will not look the same.
Then, in my Pick of the Week, let's look at Nokia (NYSE: NOK)
doing the right thing and deep-sixing the Ovi sub-brand.
One Thing Leads to Another
expected to see Sprint (NYSE: S) merge with T-Mobile. That would
have created a more stable three-way race between AT&T (NYSE:
T), Verizon and Sprint. However, AT&T jumped in to acquire
T-Mobile instead, and that changed everything. Now it looks like
the industry will only have two big competitors. Not as good.
what is next? Don't think this is over. This new AT&T/T-Mobile
merger is not only big for them; it will also set a whole chain
of events in progress.
can't do one thing in a vacuum. One thing always leads to
another -- and often unexpected -- series of events.
strong possibility is CenturyLink will jump in and acquire
Sprint. Would this be good or bad for customers, investors,
partners and workers?
AT&T and T-Mobile do merge, it will change the playing field and
make it very difficult for Sprint to compete and grow by itself.
The two big players, AT&T and Verizon, are both wire line and
wireless, while Sprint is only wireless.
the same time, we have been watching two of the smaller local
phone companies, CenturyLink and Windstream, grow through
mergers in recent years. Of these two companies, CenturyLink has
shown more of a desire to grow into the wireless space, with
Windstream could also use a wireless business plan desperately
but does not have one yet. So let's focus on CenturyLink for
Acquiring Sprint would give it an instant third-place status in
wireless. Combined with its wire line business, it would start
to look more like AT&T and Verizon, which also offer both. In
fact, it would become third in wireline and wireless. Remember,
it just acquired Embark, the wire line company, from Sprint and
Qwest (NYSE: Q), the No. 3 local phone company.
This could be full of benefits for it and the marketplace if it
knows how to run a wireless company. Does it? Remember, Sprint
was having lots of trouble and it was CEO Dan Hesse who pulled
the company out of a crash-n-burn dive.
done right, this merger could improve both CenturyLink and
Sprint: a case of one plus one equals three. It would be able to
more directly compete for the entire customer
way AT&T and Verizon do.
This would be part of the reinvention of the industry I talk
CenturyLink, this smaller, very fast-growing and entrepreneurial
company, may actually start to shake things up in both the
wireless and wire line sides of the business.
Suddenly it's on the map. It's growing through acquisitions, and
it's suddenly the No. 3 local phone company in the United States.
That is impressive.
have worked with every baby bell and many smaller local phone
companies and can tell you that I have not seen such chutzpah in
a long time. This is promising.
But What About Sprint?
course, this is not what Sprint wants to happen. It's continuing
its recovery. It likes the position it's in right now after
years of hard work, sweat and tears. However, if AT&T and
T-Mobile do merge, Sprint may have to do something dramatic like
CenturyLink, which is based in Monroe, La.,
has been acquiring companies, and I don't think it's done yet.
course, this speculation could all be completely wrong. Sprint
could end up being the acquirer. There are still a number of
smaller wireless carriers which, if acquired, would make Sprint
bigger and stronger as a wireless company. However, this would
still mean Sprint would just be a wireless carrier.
Then again, all these mergers could take place, turning the
combined CenturyLink and Sprint into an even bigger single
the question is, once the AT&T, T-Mobile merger is done, what's
What will Sprint do? What will CenturyLink do? What will
WindStream do? Just like we thought Sprint would acquire
T-Mobile until AT&T jumped in, there may be more surprises to
thing is for sure, the industry and the companies are changing.
It is still too early to know, but this is a very interesting
story we will be watching unfold over the next few years.
my Pick of the Week, let's look at Nokia doing the right thing
and deep-sixing the Ovi sub-brand and focusing on the main Nokia
marketplace can be confusing enough with all the new companies
and brands and technologies. Then companies make it even more
confusing by introducing many sub-brands.
Stick to the core business and brand.
When the soup just doesn't have the right taste, sticking with
the master brand strategy and strengthening it is always smart--
especially when you have not done so well trying to introduce a
sub-brand and instead confused the marketplace and hurt your
the last few years, Nokia has been under the gun. Just like
Motorola (NYSE: MOT) was 10 years ago, Nokia is trying to find
itself as the marketplace changes from ordinary cellphones to
hot new super-smartphones.
Motorola did it with the help of Google (Nasdaq: GOOG). They
tried for years and failed until then. What is the future for
Nokia? The market has changed in the last few years. Will they
have to partner with Google as well with Android? Or maybe
Microsoft (Nasdaq: MSFT)? That company is not hitting on all
cylinders with smartphones themselves yet. Can they actually
There is a lot more to follow in this story, but here's a pat on
the back to Nokia's Chief Marketing Officer Jerri DeVard and key
Nokia executives who decided to keep their eye on the ball. Good
Whatever Nokia does next, at least it seems to be starting to
think in the right way and starting to focus on the value of its
brand name first. That is a great start.