Trending: Microsoft unveils Azure Container Instances, joins Cloud Native group, isolating AWS on Kubernetes

screen-shot-2014-02-14-at-9-02-38-am

The wireless industry is abuzz over a potential merger between T-Mobile and Sprint, but it’s not clear yet if U.S. regulators would be willing to let a deal go through. This chart, which Quartz reports is from a Goldman Sachs report on mergers and acquisitions, shows exactly why Sprint wants to merge with T-Mobile, and why regulators might not be so accommodating of such a deal.

The way Sprint Chairman Masayoshi Son reportedly sees it, a merger between the two companies would create a competitive playing field where Sprint and T-Mobile could finally compete on an equal level with Verizon and AT&T, which control the lion’s share of the profits in the wireless industry. But on the flip side, the Justice Department and the FCC have said that they’re happy with the number of players in the wireless market, and don’t really want to see it shrink from four to three major carriers.

John Legere
John Legere

Compared to where the industry was in 2003, three of the major carriers on that chart have been gobbled up in mergers and acquisitions. But while Verizon and AT&T control more than two-thirds of the market, Goldman analysts said that pricing pressure and innovation from Sprint and T-Mobile have kept prices low.

“It is arguable that the industry has in fact become more competitive for the industry’s top two companies, as #3 and #4 players Sprint and T-Mobile have strengthened their competing nationwide networks with ongoing buildouts and spectrum acquisitions (i.e., T-Mobile’s acquisition of MetroPCS and Sprint’s acquisition of Clearwire),” Goldman analysts said. “This has enabled them to be more competitive vs. Verizon and AT&T in key urban markets than previously, a dynamic that could continue to keep a lid on industry margins near term despite a very high level of consolidation.”

That’s ultimately the issue at hand: regulators are worried that a merger would lead T-Mobile and Sprint to step back from trying to gain subscribers through aggressive innovation. While an oligopoly is good for boosting financials, it’s not necessarily good for consumers. Especially with the success T-Mobile has seen with its “Uncarrier” moves, it seems like a four-player wireless market may be what’s in the cards, at least for a while longer.

In a conference call with analysts this week, Sprint CEO Dan Hesse not surprisingly said that further consolidation in the wireless industry would be a good thing.

“I believe that further consolidation in the U.S. wireless industry outside of the big two, AT&T and Verizon because they’re so large, would be healthy for the competitive dynamic of the industry, would be better for the country and better for consumers,” Hesse said.

Like what you're reading? Subscribe to GeekWire's free newsletters to catch every headline

Comments

Job Listings on GeekWork

Find more jobs on GeekWork. Employers, post a job here.