When AT&T announced on the weekend it would buy T-Mobile in full for $39 billion, few saw this coming. But while both companies serve the U.S., this unexpected earthquake in America's telecom industry may be further reaching than many Canadians would guess.
Some industry sources are firm in their belief that this major shift will trigger aftershocks north of the border.
Quoth the Financial Post:
"In telecom, scale matters," one Bay St. analyst said. That is something relative newcomers Wind Mobile, Mobilicity and others are still striving for as they vie for market share with far larger industry incumbents Rogers Communications Inc., BCE Inc.'s Bell Mobility and Telus Corp.
Rules established by Ottawa a few years ago to nurture competition prohibit Rogers, Bell and Telus from buying up the new operators, or rather the airwave licences each holds, for another two years. So as Wind and Mobilicity as well as Public Mobile fight tooth and nail to gain subscribers - often at the expense of the others - rumours of an inevitable combination continue to swirl.
"There is growing probability that the minors (will) consolidate to get themselves more market power and access to capital," the analyst said.
A legal source in the article observes that three to four carriers appears to be the unwritten maximum any given country can maintain in the telecom industry, and that five seven competing carriers creates conflicts and complexities that are not sustainable—making mergers inevitable.
There have yet to be talks or even rumours of any mergers, but if there is no consolidation among the new entrants, they will almost certainly be snatched up by the Big Three as soon as this option becomes available, once again leaving our country with an oligopoly. But maybe that's just the nature of the beast.