S&P Report Says Having 4 Major US Wireless Carriers Isn't Sustainable
More consolidation would be helpful to the financial future of the U.S. wireless industry, Standard & Poor’s Financial Services said in a research report to its clients. “Although it is hard to argue that having four nationwide carriers has not…
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been good for consumer pricing, we believe that the current roster of four is not sustainable longer-term and is likely to result in deteriorating credit quality for the industry overall,” S&P said. “Even though operating and financial performance for T-Mobile, and to a lesser extent Sprint, have been improving, we believe the recent launch of unlimited data plans by AT&T and Verizon indicate that the industry will struggle to maintain its current level of profitability without consolidation.” S&P is generally positive on a possible Sprint/T-Mobile deal. “We believe that there could be significant long-term benefits for a merged company, including improved scale, a larger spectrum position, and the ability to better compete with” AT&T and Verizon. Questions include possible regulatory roadblocks and that Deutsche Telekom, parent of T-Mobile, “may be a reluctant seller given that T-Mobile US is its only growth vehicle and a merger with Sprint could hurt near-term prospects.” S&P was less positive on AT&T’s proposed buy of Time Warner. The financials are questionable and “with such acquisitions, there is always a risk of cultural differences between the two companies, which if mismanaged could result in the defection of creative talent from Time Warner,” said the Thursday report.