Mobile consolidation: the push to reshape mobile markets

Mobile consolidation is rising up the agenda again, driven by market maturity, regulatory shifts and growing pressure on returns.

As competition increasingly centres on price and unlimited data plans become the norm, operators are under greater pressure to reduce costs and strengthen their position. Consolidation is emerging as one of the most effective ways to do that.

In this video, Tom Rebbeck, Partner, explores what is putting consolidation back in focus and how outcomes can vary depending on how deals are structured and executed. From stronger market positions and pricing power to the risk of disruption from new entrants, the impact is not always straightforward.

The message is clear: consolidation can play a critical role in improving market dynamics, but success depends on understanding how each market will respond.

Learn more about how we support operators, investors and lenders in a consolidating mobile market or speak to one of our experts now.  

Transcript

What has put mobile consolidation back on the agenda?

Well, I think it's probably never really been off the agenda. But there are reasons why it's higher up in importance right now. One is from the regulator perspective. Regulators are clearly looking more favourably at mergers. But the other, I think, is just a sign of the maturity of the market. We're increasingly moving to a market where unlimited plans are the default. And when you have that position, it's harder for operators to compete on other factors than price. And so there's more pressure on cost. And so operators are looking at ways of reducing cost and merging from four to three is one of them.

Who benefits when a mobile market consolidates?

This really depends on the merger and how it goes ahead. In theory, it should be that the three remaining operators are in a stronger position. There's not so much competition. They've got more pricing power. In practice, we see varied results, though. Sometimes it's the operator that is leading the consolidation that does well. We saw that in the US with T-Mobile. But in other times, it's the operators leading the consolidation that is distracted by the merger and all of the activities around that, and so they end up losing share. We've also seen examples where the conditions of the merger allow for a new entrant, and that new entrant is really disruptive in the market. We saw that in Italy. We may be seeing the same in Spain. It really depends on the market and how the consolidation actually happens.

How are investors approaching mobile consolidation deals today compared to previous years?

I'm not sure exactly how they're judging it differently, but I think there is much more expectation that the mergers will go ahead. If you look at the share prices of the main European operators, for a long time, the share price was flat. Over the past 2 years, 18 months, we've seen a big improvement in their share price, and that's largely under the expectation that consolidation will be allowed to go ahead.

What role can consolidation play in addressing challenges in mobile markets?

I don't think it's the last chance. There are different ways that markets can be fixed. There could be different types of network sharing, of brand sharing, and so on. There are other ways that operators can manage their costs. I wouldn't call it the last chance. 

How does Analysys Mason support clients with mobile consolidation?

I think one of the things that makes us different is the combination of the consulting capabilities but also the research capabilities. We have data on all of these different markets, the different operators, their revenues, the number of subscribers and so on.

We can look at the impact when four-to-three mergers have happened previously. We've got a huge amount of data there to inform us. As well as the research, we've also got our analysts who are working very closely on these issues. We're writing reports, looking at the main trends in the market, the move to unlimited, which I think is one of the drivers behind this consolidation. We’ve looked at that in detail. So, the expertise of our analysts and the access to our analysts is another thing that sets us apart.