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Sprint, T-Mobile Will Never Catch AT&T, Verizon

It’s too late for Sprint and T-Mobile USA to ascend to the top of the food chain in the U.S. wireless market.

That’s according to a special report by Moody’s Investors Service, the credit ratings agency.

Verizon Wireless and AT&T, the largest U.S. wireless carriers, will continue to grow stronger while Sprint and T-Mobile struggle to raise adequate capital, said Moody’s, which added that Sprint and T-Mobile post feeble profits.

“AT&T Mobility and Verizon Wireless have better network coverage, wider capabilities and wider profit margins which gives them a competitive advantage that smaller rivals just can’t match,” said Mark Stodden, a Moody’s analyst and author of the report. “It is too late for competitors to invest and catch up; Sprint has the willingness but not the ability, while T-Mobile’s parent Deutsche Telekom, is the opposite.”

Moody’s reported that Verizon and AT&T have invested a whopping $200 billion in wireless network assets over the past decade. That’s roughly double what Sprint and T-Mobile have spent.

Moody’s estimates that AT&T and Verizon are responsible for 81 percent of the 2011 industry earnings before interest, taxes, depreciation and amortization (EBITDA), and the New York-based credit ratings agency anticipates their EBITDA share will remain roughly 80 percent through 2015.

“Consolidation could ease pressure on the smaller carriers, although regulatory concerns over competition could stymie a merger of Sprint and T-Mobile,” Moody’s said. “It’s more likely that Sprint will consolidate smaller prepaid carriers while T-Mobile’s future hinges on the strategic review by its majority equity owner, Deutsche Telekom … .”

Moody’s said U.S. regulators expressed their preference to keep four national carriers in their comments on the failed AT&T/T-Mobile merger. Sprint, Moody’s said, is more likely to attempt to expand in the prepaid market by acquiring MetroPCS and Leap Wireless International, the owner of Cricket. Such acquisitions, however, wouldn’t greatly advance Sprint’s competitive position, according to the credit ratings agency.


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