M&A OVERHAUL

This was supposed to be the year of consolidation for the wireless industry, but it looks like mergers and acquisitions will barely get off the ground in 2002. Carriers used to leak rumors of merger talks to the press as fast as their execs could dream them up. The tacit point was to get a sense of how investors would react to such M&A ambitions — and perhaps beef up their stock in the process. That no longer works. AT&T Wireless and VoiceStream are allegedly in merger talks, but investors barely blinked. Indeed, the extravagant wireless deals witnessed just a few short years ago are behind us, which has left the wireless M&A landscape in a state of flux. Rather than making millionaires out of the investors involved, today's mergers will be about creating a survival strategy for carriers — carriers that are sinking in a slowing market plagued by debt and high buildout costs of the next generation of networks. Financially, these unions won't look very pretty. And many of them might not work out at all. While one of the biggest regulatory hurdles — the spectrum cap — will be eliminated next year, it's still unclear what criteria the Department of Justice will use to determine whether a merger is anti-competitive. Sagging stock prices, limited cash on hand and regulatory barriers will make the ensuing mergers a long-term struggle, and it may very well force some carriers into bankruptcy. Things may get worse sooner than we think. Now that it's the third quarter — the dreaded quarter when subscriber growth inevitably slows for operators — carriers will have to battle even more negative investor sentiment.