Global Shakeout: Will U.S. Carriers Survive?

When competition shakes out a market, three companies usually emerge dominant, serving between 70% and 90% of the total market. So goes Jagdish Sheth’s (www.jagsheth.com) philosophy.

Sheth is an author, consultant and the Charles H. Kellstadt Professor of Marketing at Emory University in Atlanta. At Supercomm 2001, he discussed the “rule of three” concept relative to wireless carriers globally.

“I don’t believe a single American company will survive,” he said.

Sheth predicted foreign companies would acquire North America’s top three carriers. Vodafone (www.vodafone.com) will purchase Verizon Wireless (www.verizonwireless.com), and NTT DoCoMo (www.nttdocomo.com) already has AT&T Wireless (www.attws.com), he said. As for Cingular (www.cingular.com), North America’s No. 2 carrier, Sheth said it likely would be acquired by a global alliance of some of Vodafone’s and NTT DoCoMo’s competitors or one or more of the companies will invest in it individually. The potential buyers of or investors in Cingular include Orange (www.orange.com), Telecom Italia (www.telecomitalia.it/index_uk.html) and Telefonica (www.telefonica.com/home_eng.html), as well as some U.S. companies.

U.S. regulations against foreign ownership of carriers won’t stop the foreign takeovers of North America’s big three, according to Sheth. He said the ownership percentage rules designed to limit foreign ownership could be circumvented by global alliances similar to those that have become common in the airline industry. Sheth also noted that Deutsche Telekom (www.dtag.de/english/) was allowed to acquire Voicestream Wireless (www.voicestream.com). The acquisition was completed in May.

In addition, Sheth predicted non-telco companies, such as aircraft and automobile manufacturers, would determine the fate of the wireless industry.

“Both of these industries are in the transport business, and they will diversify from the transportation of cargo and passengers to carrying information,” he said.