Monday, March 21, 2011

Thinking about cellphones ...

With all the stuff going on in the world, I wonder about the things that catch my eye.
For example, in the WSJ the other day, I was reading how the CEO of Sprint was balking at the price per share that T-Mobile wanted in a proposed merger. I thought at the time, Well, that seems responsible, especially when both Sprint and T-Mobile are way behind Verizon and AT&T in customers, gadgets, etc. Why acquire all of that debt not knowing whether you can actually compete with Verizon or AT&T? And who says the customers are going to stay after you merge? Then, I started seeing Sprint ads on television and thought, OK, the CEO is trying to boost the stock a bit and raise some corporate awareness.
However, just a few days later, AT&T announces that it will acquire T-Mobile in a nearly $40B deal which sends Sprint's stock plunging: ["Sprint Plunges After AT&T's T-Mobile Deal Is Seen Leaving It Weaker No. 3"].
So, maybe it wasn't worth being safe after all. Although, there is no guarantee in any of this. The deal with Sprint could have been a disaster. And, obviously, all the people looking at it didn't think T-Mobile was worth the price for Sprint to acquire.

This got me thinking about all of the mergers that have occurred since 1998, when I bought my first cellphone. My first phone was with Omnipoint which later merged with Sprint. Sprint later merged with Nextel. Remember MCI? It used to be around. The company was bombarding people with ads at the time. And yet, we've forgotten them completely. My wife used to have Cingular which later bought AT&T and dropped its name. Cingular was too big and had to spin off some of its subscribers. We had Sprint but now have AT&T, which now is merging with T-Mobile. This leaves three big companies: Verizon, AT&T, and Sprint, and a bunch of smaller companies that piggyback onto the big companies' networks.
But wasn't all of this expansion supposed to be about competition? How did three companies end up controlling most of the cellphone subscribers? How is this even allowed? And, what can be done about it? This is the big question that needs to be asked of government, the entity that is supposed to regulate these things and protect the consumer. It needs to happen even more so as we move away from cellphones as a luxury to a necessity.


Mark de Zabaleta said...

corporate maneuvers normally look for increasing the price of the shares of the company that purchased, in this case T mobile. In the end the consumer is the least ...!


nygrump said...

With the elimination of payphones, its getting to the point where an individual must pay a monthly fee in order to be able to access the telecom network. Europeans who visit here often express their astonishment to me at the high prices and lack of usability of cell phone service here. Doesn't matter, so long as the battery and chip are inserted, you are paying for a govt tracking and surveillance device.

Mike Rice said...

"Government, the entity that is supposed to regulate these things and protect the consumer"... fails miserably - yet again.