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September 30, 2010
Conventional wisdom tells us that more competition in a market is better for the consumer and better for the economy overall. In fact regulators in many countries around the world have been promoting competition, intending to give consumers more choices and lower mobile tariffs. But is there a point at which the level of competition becomes unsustainable, and possibly even begins to be detrimental to the economy? Can there be such a thing as too much competition?
Take two cases in point: India and the UK. These are two of the most competitive markets in the world for mobile operators, as I describe in detail in my new Global Insider Influx of New Competitors Pose Challenges for Mobile Operators Worldwide.
As you can see in the graph below, the top two operators combined take significantly less market share than the averages for their respective regions. Competitive markets are supposed to benefit consumers, so how does it play out in these two hyper-competitive markets? In India, as it turns out, a handful of smaller players are currently in negotiations with the government to hand back their spectrum licenses, with further market consolidation expected in the near future. Clearly the Indian market was unable to support so many operators.
In the UK, the number three and four mobile operators in the country, Orange and T-Mobile, joined together to create the country’s largest mobile operator, which you can read about in our UK Country Intelligence Report. While it’s still too early gauge effects that the merger has had on the market, as most of the planned changes in service have yet to take place, early reports have suggested significant benefits to UK consumers.
Isn’t this all backwards? Aren’t economies always supposed to benefit when markets are less concentrated? The FCC in the US seems to think so, and some in the mobile industry are concerned that this may spell increased regulation in coming months. The North America market has indeed become more concentrated in the five-year time span from 2004-2009. But what’s also clear is that North America (defined as US and Canada) is not very concentrated when compared with the rest of the world. We will be following this story as it develops to see if the FCC does decide to increase regulation of the mobile market in the US, and whether it will benefit US consumers as intended.
— Emily Smith, Analyst
Related resource:
M&A Activity Expected to Increase for AME Mobile Operators
AME Insider published September 2010
In this report, we analyze the different opportunities and challenges that the telecom markets in Africa & the Middle East present to those mobile operators interested in mergers, acquisitions and consolidations in the region.
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Pyramid Points
