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The Mobile Merger Domino Effect

The Mobile Merger Domino Effect

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?

By Jeff Kagan
05/26/11 5:00 AM PT

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.

So 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 doing the right thing and deep-sixing the Ovi sub-brand.

One Thing Leads to Another

We expected to see Sprint merge with T-Mobile. That would have created a more stable three-way race between AT&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.

So 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.

You can't do one thing in a vacuum. One thing always leads to another -- and often unexpected -- series of events.

One strong possibility is CenturyLink will jump in and acquire Sprint. Would this be good or bad for customers, investors, partners and workers?

If 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.

At 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 limited success.

Windstream could also use a wireless business plan desperately but does not have one yet. So let's focus on CenturyLink for this conversation.

Industry Reinvention

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, 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.

If 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 the way AT&T and Verizon do.

This would be part of the reinvention of the industry I talk about.

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.

I 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?

Of 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 this.

CenturyLink, which is based in Monroe, La., has been acquiring companies, and I don't think it's done yet.

Of 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 company.

So the question is, once the AT&T, T-Mobile merger is done, what's next?

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 come.

One 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.
Jeff Kagan's Pick of the Week

For 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 brand.

The 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 Visit the VMware Tech Center 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 mast brand.

In the last few years, Nokia has been under the gun. Just like Motorola 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. 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? That company is not hitting on all cylinders with smartphones themselves yet. Can they actually help Nokia?

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 move.

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.


Jeff Kagan is an E-Commerce Times columnist and industry analyst following wireless, telecom and healthcare technology. He is also an author, speaker and consultant. Email him at jeff@jeffKAGAN.com. Read the first chapters of his new book Life After Stroke, now available at Amazon.com and Barnes & Noble.


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