Merger Wheel Keeps Spinning
By Carlo Longino, Fri Feb 04 00:15:00 GMT 2005

Cingular buys AT&T Wireless, Sprint joins forces with Nextel, SBC buys AT& reports have Verizon eyeing Sprint.

A stock site is reporting that Verizon is looking at buying Sprint, in what would be a major ending to a round of US telecom consolidation, both wireline and wireless. Cingular's purchase of AT&T Wireless, unsurprisingly, spurred further consolidation in the mobile industry, with Sprint and Nextel linking up, and given the frequency with which Verizon's name popped up during both those deals, a major mobile acquisition by it wouldn't come as too big a surprise -- even less so given the major shake-up going on with old-school wireline telecom carriers.

With SBC's purchase of AT&T and MCI on the selling block (with Qwest appearing to be the remaining suitor), Verizon's wireline business could use a boost to become more of a national player, rather than a regional one. And no doubt Verizon Wireless would love to see some more consolidation in its market, though a takeover of a rival the size of Sprint (it's unclear from the story what would happen to the announced merger with Nextel should any deal happen) would raise some regulatory concerns.

Why the push for consolidation? As well as taking a page out of its parent Verizon's book and building tremendous economies of scale -- Verizon Wireless has 42.1 million subscribers, and Sprint PCS 24.8 million -- it makes price increases much easier to stick. Per-minute charges have steadily fallen in the US over the last several years, and faced with slipping ARPUs, carriers are feeling pressure to act. With non-voice revenues growing slowly, raising tariffs is an easy answer, and buying out your competitors means there's one less company that can undercut you and steal consumers. Indeed, the Web is abuzz with rumors Cingular is ready to jack its prices up next week.

One interesting sidenote is many of the rumored price increases are for data and messaging services. Cingular looks to be increasing the price of its flat-rate, unlimited data plan, and pulling messaging out of its bundles. While many carriers are driving data prices lower to drive adoption, Cingular is increasing its -- a sign data has gained widespread acceptance? Or just trying to eke out some ARPU gains?