The advertising trade press has likened dueling television spots between Verizon Communications Inc. and AT&T Inc. to the cola wars waged by Coca-Cola Co. and PepsiCo Inc.
Essentially, the telecoms accuse each other of being Pepsi. Verizon Wireless wins points for details by posting color-coded maps with a Reagan/Mondale-esque imbalance of red states (where Verizon has a third-generation wireless broadband network) to blue states (where AT&T has introduced advanced technology).
After failing to squelch Verizon's ads in court, AT&T countered with vignettes of actor Luke Wilson touting the carrier's superiority by shuffling through postcards from cities where it has wireless coverage and reminiscing about old flings.
The cola war metaphor is apt, and not just because of the tone of the campaigns. Increasingly, Verizon and AT&T are playing Coke and Pepsi to a field of RC Colas and Mr. Pibbs.
The market imbalance is not as stark in mobile wavelengths as it is on soda fountains. The disparity is real and mounting, however. By jabbing at each other, Verizon and AT&T seem to imply that the rest of the industry is not entirely in the game. Customer statistics from the third quarter support that view. Wireless carriers tracked by Wells Fargo Securities LLC gained 2.2 million net subscribers during the period. Verizon and AT&T represented 102% of the net increase.
The percentage-busting figures illustrate that the wireless business is increasingly inhospitable to anyone other than Coke and Pepsi. Sprint Nextel Corp.'s struggles to keep customers have been well documented in recent years. However, Wells Fargo notes that Deutsche Telekom AG's T-Mobile USA Inc. lost customers for the first time in the third quarter.
The discrepancy between the top two wireless carriers and the rest of the industry is one reason that speculation about a combination of Sprint Nextel and T-Mobile USA will continue to surface every six to nine months. And there will be calls for other companies to combine. Walter Piecyk of Pali Capital Inc. has argued that regional mobile carriers MetroPCS Communications Inc. and Leap Wireless International Inc. should merge, primarily because they would be more valuable to an acquirer if their spectrum licenses were bundled together.
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A combination of MetroPCS and Leap would not greatly affect the marketplace. However, a combination of Sprint Nextel and T-Mobile USA could. For one thing, such a deal would present the Obama administration with an uncomfortable dilemma: whether to allow the creation of a third, strong competitor to AT&T and Verizon or preserve two middling rivals.
Of course, a major wireless deal may not produce another stable competitor. Consolidation of the wireless industry in the last several years was supposed to "rationalize" the business and make it easier for the remaining telecoms to coexist. The merger of the old AT&T Wireless Services Inc. with Cingular Wireless Corp., and Sprint Corp. with Nextel Communications Inc., reduced the number of competitors from six to four.
One of the deals worked surprisingly well. The combined Cingular and AT&T Wireless surpassed Verizon Wireless as the top mobile carrier. Together, the wireless providers were able to overcome previous technological snags. Though Verizon Wireless has since regained the lead, thanks in large part to its acquisition of Alltel Corp., AT&T built its customer base with the addition of the iPhone.
The other deal has worked less well. Post-merger Sprint Nextel had difficulty combining its two networks, and traffic overloads diminished the quality of its services. The Overland Park, Kan., telecom still struggles to retain customers who have signed the most profitable contracts.
Sprint Nextel's decision to invest a further $1 billion in wireless broadband provider Clearwire Corp. may indicate a decision to remain independent for the time being. Clearwire is a big-tent partnership with Google Inc., Intel Corp., Comcast Corp. and other cable providers to develop a nationwide network using WiMax wireless broadband technology.
The WiMax venture presents Sprint Nextel an opportunity to muscle into competition with Verizon and AT&T, which are backing a rival platform for more advanced mobile broadband services, Long Term Evolution, or LTE. The large-scale competition for this "next generation" of wireless broadband services is still years away.
Meanwhile, the maps in Verizon Wireless commercials continue to
present an either/or view of the world. Verizon or AT&T? Coke or