Sextel Take Three

2 thoughts on “Sextel Take Three”

  1. Nick Wray is way off-base here.

    The relevant context of evaluating the merger is not to focus on the enterprise but the CONSUMER.

    VZW and Cingular are hardly innovators in the business, and lets face it they are more interested in protecting there backsides. And this merger helps them more than it could ever hurt them.

    One metric that is very important, and often overlooked is Yield, ie. $$$/MOU. And when we chart the carriers by Yield we get an interesting story, plus a TRUE glimpse into the future.

    VZW, Cingular, Nextel all have Yields in 9.5 – 11 cts/MOU.

    Sprint and TM have Yields in 6 -7 cts/MOU.

    What is obvious with just a simple calculator is that while VZW has nearly twice the subs of Sprint, its total network MOUs is only ~20% greater. Hmmmm.

    The affect of Sextel is to co0opt one consumer friendly provider (sprint) and to further marginalize the other TM.

    How does the Yield chart predict the future? I’m so glad you asked.

    Its very simple, once who have “scale”, ie lots of subscribers, aggressively lowering prices is too great a risk because of cannibalizing your installed base.

    One stupid pricing decision (ie. Sprint’s failed ClearPay) can nearly terminate a company.

    Will Sprint-Nextel be an agressive player? Most likily not, because the while the first rule of business is to not underperform, the second rule is to not grossly overperform.

    Thus the Sextel creates strong indications that this merger is anti-competitive, because Sprint will now have a large customer base, and the cover of defensive RBOC competitors to hide beneath.

    Large subscriber bases are not the basis of a competitive marketplace for consumers, they are antithetical. Just plot gross adds vs. installed base. Its obvious.

    This merger is great for shareholders, but not consumers.

  2. CS, right as usual but your news is not really shocking. All mergers are anti-competitive and in a general sense anti-consumer (although it is nice when your crappy service provider is replaced by one with its act together — this happened to me once when Comcast bought out my incompetant local cable co). Anyway, the good news is that bigger=slower meaning oportunities will come along for new players to offer something better. The only really bad news in my book would be if Sextel decided to abandon Sprint’s MVNO (the consumer’s real friend) support.

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