Boston — A bid by start-up French carrier Iliad to buy T-Mobile could cause U.S. service pricing to tumble, leaving Sprint the least able to compete among the national carriers, Strategy Analytics concluded.
In a report, the research and consulting company said Iliad drove down French service revenues by 29 percent and led to a 19 percent decline in carrier EBITDA since its launch. Iliad founder Xavier Niel is also an investor in Israel's Golan Telecom, and its “aggressive mobile launch two years' ago has had an equally dramatic impact on the market,” Strategy Analytics added.
Despite the bid, however, Strategy Analytics said Iliad “is unlikely to have an appetite for a bidding war with Softbank [to buy T-Mobile].” Nonetheless, the company said, the bid “represents a wake-up call for all the carriers in the increasingly saturated market.” U.S. carriers must offer “differentiated products targeted at specific market needs by segment” given that pricing, network quality and product features “are all ultimately replicable," the company said.
Susan Welsh de Grimaldo, wireless operator strategies director, pointed out that T-Mobile's uncarrier strategy and transformation “has been more about offering customer choice and flexibility rather than lower prices,” but “Iliad's Free strategy is all about the price.”
The obvious response by AT&T and Verizon would be to offer multi-play bundles, which Sprint can’t provide because it doesn’t offer video services to homes or offer a nationwide landline service, she said.
A successful Iliad bid, said Phil Kendall, wireless operator strategies executive director, “would force the operators to move away from battles based on network coverage, speed and pricing, and focus on effective marketing strategies built on segmentation.”
The bid “is a wake-up call for operators to get ahead of the game,” he said. “Differentiated products targeted at specific market needs by segment are the key to success.”