Rob Cyran and Jeffrey Goldfarb discuss how vanishing M&A prospects have forced AT&T, Verizon, Sprint and T-Mobile US into a vicious price war that is eating away at cash flows.
Yeah iPhone six is a huge hit but what is it doing there Telecom operators every single one of them has it. And robs your and you think that they're now just all eating themselves basically ended their four companies and the problem is when he got four companies all fighting if it's kind of like prisoners plummet or all rushing to get the best deal. Customers and that means that things were margins in other words they're just that is giving all they've that's there was a time the ramp up to the Smartphone regularly iPhone ruled out 2007. There is exclusivity. Every there were a lot of customers didn't have. It you know any sort of Smartphone really hit and the residents that are AT&T is paying a lot of money to this fund to give customers. That led to customers fleeing to AT&T now all of them have yet until they're all doing if he could see an and the reason is because the first off there for car companies. AT&T tried to buy team a while and then sprint tried in 190 law and the governments of both times no you can't do that. And so what that means their four companies in the market we have four companies in a market saturated or it's such it saturated market you you've got lots competition. The other problem is in telecoms. Martins are. Are incredibly reliant upon skill if you got a lot of customers can you made money the money that it takes to sort of on the one you have to really to build on a lot of base stations it costs a lot right Telecom company. But each count each additional Costa Rica tends to be higher profits. Here for a from now the problem is that Iran's margins are very good so I was good good for customers not confer in the masters exactly so what we've seen as some real price wars happening right yet T-Mobile I'm last year they started pricing. Is that cut prices now all of them done sprint for instance in August. The they doubled the amount of data which T-Mobile is offering for the same price and chemo while at that point was offering better deals and AT&T Verizon. AT&T Verizon are starting to match them as well so you all all four of them and all this is just starting to show through this most recent quarter we've had the results from. It's his presence frank springer got hit really down ES Britain T-Mobile or both of burning burning money and then the margins. It. Verizon and AT&T also suffered. In addition they're all spending more Catholics is they're trying to compete on the best network to. That means that he knows that putting everything margins are against exact bottom line here and we've seen in Europe when they had come when countries had four operators the markets markets are really awful for them. The government eventually change the minds to well you know it actually color better to have a couple of strong companies that can actually invest money in in the network then a bunch of companies don't have enough money. US and anywhere close to that dearest has decided. We'd like lower prices. So we're not allowing consolidations. So until the US government changes their mind which were happening right sin. It's going to be good because there's probably better operators now one glimmer of hope I guess is this idea that customers want more and more dated may be willing to pay. Wouldn't. Media premium but not for long on on the edit the idea is that in a row and gets more divisive again Mobley here last time out here cellphone use year round tablet you know and and you getting warmer contracts and you use more more data. The problem is when when the companies are fighting this hard and they're doubling the man do that the other person is offering. You know it plays additional 10% and it doesn't really matter does it right not so we'll keep an eye on that sounds like a bad story to follow up. We'll be back more breaking views tomorrow.