Is U.S. Mobile Market About to be Rearranged?

With shocking suddenness, U.S. service providers are preparing a key test of regulator willingness to rearrange U.S. service provider market share. The latest potential move has Sprint considering a possible bid to buy rival T-Mobile US, a merger that will test regulator and antitrust authority thinking about sustainable market structure in the mobile business.

Separately, cable companies are circling Time Warner Cable, the second-biggest U.S. cable operator. And while an initial bid by Charter Communications likely would not raise undue regulatory issues, a bid by Comcast, the biggest U.S. cable company, clearly would do so.

Though earlier Federal Communications rules specifically prohibited any single U.S. cable company from serving more than 30 percent of U.S. cable TV customers, that rule was invalidated by U.S. courts.

But antitrust authorities are sure to consider a merger of the number one and number two cable companies--Comcast and Time Warner Cable--too big to ignore.

The potential Sprint merger with T-Mobile US also would face high hurdles. Antitrust requlators already had argued, when AT&T tried to buy T-Mobile USA, that the U.S. mobile market already was too concentrated.

Though a Sprint-T-Mobile US tie up would not have the market impact of the proposed AT&T merger with T-Mobile USA, the merger review still would occur under circumstances where the U.S. Justice Department already has deemed the market excessively concentrated.

The rival argument is that only if Sprint and T-Mobile US are combined would they be able to compete on a relatively even basis with the larger Verizon Wireless and AT&T Mobility.

Also an issue is the general regulator thinking that a minimum of four providers is required to sustain innovation and competition in a mobile market. That has been an issue for European regulators in 2013, for example.

Sprint, according to a  Wall Street Journal report, is studying regulatory concerns and could launch a bid in the first half of 2014.

A deal could be worth more than $20 billion, depending on the size of any stake in T-Mobile that Sprint tries to buy.

Whether such an acquisition always has been an explicit part of SoftBank’s thinking about strategy for the U.S. market is unclear.

But observers have been noting for some years that the market share gap between Verizon Wireless and AT&T Mobility, on one hand, and Sprint and T-Mobile US on the other hand, could not be closed easily any other way than by a merger of the two smaller companies.

If such a deal were to pass regulatory muster, it also would have implications for other would-be providers of Long Term Evolution Services in the U.S. market, as the gap between any new provider and the top three carriers would be formidable.

Dish Network is among the potential contenders who then would have a tough decision to make. But there also is the matter of Globalstar and LightSquared, for example.