Mobile operator consolidation – good for businesses?

By Dave Bailey
30 Jun 2009 View Comments
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Would mobile operator consolidation signal higher charges for business?

Market consolidation can have an unsettling impact on customers, so rumours that mobile network operator Vodafone is mulling a bid for UK rival T-Mobile may have put some IT buyers on high alert.

However, some industry experts believe such a deal could benefit customers through lower bills., although others are not so sure.

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T-Mobile UK, which is part of giant German incumbent telco Deutsche Telekom, last month announced a €1.8bn write down at its UK operations, sparking speculation about the unit's future.

But Emeka Obiodu, senior mobile analyst at market watcher Ovum, said customers need not be spooked by the speculation.

"We're not forecasting any major problems for customers with the potential acquisition of T-Mobile by Vodafone – we still see the mobile industry maintaining the same competitive landscape as it is now," said Obiodu.

If the acquisition takes place, the biggest impact will be on the operator with the lowest market share – 3 – explained Obiodu. "The UK mobile market has been ripe for consolidation for a long, long time, and it's unfortunate that T-Mobile looks like the one to fall first, because everybody expected 3 to be the first."

Frost & Sullivan principal analyst Sharifah Amirah said that five mobile network operators "with a current mobile subscriber base of close to 80 million in the UK, is at least one too many".

And while consolidation necessarily means less choice, it need not mean higher prices, as the economies of scale Vodafone may be able to realise through the acquisition of T-Mobile UK would help reduce costs, said Obiodu.

"This is the whole point about mobile operators sharing their networks – to reduce their costs so that they could potentially pass it on to their customers, " he added.

Not everyone is so hopeful of seeing customers benefit, however. "The rumoured acquisition of T-Mobile UK by Vodafone is more about cost-savings for Vodafone, than an opportunity to pass on price savings to business and consumers," said Analysys Mason analyst Richard Thurston.

Thurston said that Vodafone is in the middle of a £1bn cost-cutting programme, and there are many savings which could be realised by acquiring another UK operator.

Furthermore, T-Mobile has a relatively small share of the enterprise mobile market. "This would mean that any acquisition might not directly provide many new services for businesses," added Thurston.

Any deal would be subject to close scrutiny by regulators, pointed out Ovum's Obiodu: "Even if the regulator would approve the deal, they're likely to impose some conditions on it."

Quocirca principal communications analyst Rob Bamforth agreed: "Ofcom may want to horse trade a little on the details, for example to widen coverage obligation or move the mobile operators to more radio access network sharing."

"But I don't see Vodafone having a 40 per cent market share as being a blocker for any deal," he added.

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