Few Winners in Heated Cellphone Wars

[Commentary] If you are wondering who will be your cellphone provider next year, so are the cellphone companies.

Maneuvers by American cellphone providers to acquire one another are threatening to erupt into all-out war. And the question is not only which ones will survive, but whether the survivors will be ruined by the prey they are rushing to swallow, leaving consumers by the wayside. The rush to complete deals is an investment banker’s dream. But the hunt may lead these companies to not only overpay but acquire companies that are underperforming or otherwise don’t fit well. Then they have to find a way to run them profitably. And it may be that it is not being large that is crucial to winning in this game, but technical innovation. That is what Apple found out to great success. So far in the cellphone wars, these other considerations appear meaningless. For consumers, this means that there is likely to be less choice as wireless carriers disappear. And whether service will improve or large carriers will simply occupy more space is unknown. Regulators, meanwhile, are likely to stand aside from these smaller deals, instead buying the argument that AT&T and Verizon need a bigger third competitor to stand up to it. It remains to be seen if that is true, but in the heat of the moment, cellphone executives believe there is no choice but to acquire one another. And in these wars, it is all about making a deal. Consumer concerns are secondary.

[Steven M. Davidoff is a professor at the Michael E. Moritz College of Law at Ohio State University]