AT&Tmobile….Sorry I mean AT&T and T Mobile.

 

Disclaimer : Thoughts mentioned below are directly influenced by class discussion and reading different opinions about the case. 

The announcement of merger between AT&T and T Mobile USA is creating huge debate in US. Whether industry is moving towards duopoly where AT&T and Verizon will be only players and both using different technology. This merger is interesting because it means now there will be only one GSM player. Wow, so if you have a GSM phone then you are almost done. For my friends back home its like having only Airtel for GSM…Scary isn’t it.

So everyone firing bullets and bombs and everything they can find at AT&T and wanting government to disallow the merger. The merger process will take over a year and if Government disallows the merger then it will be advantage to no one. There are few reasons I am saying it.

When I see the telecom industry with huge infrastructure to manage it makes sense not to duplicate the infrastructure. AT&T and T Mobile both operate GSM services. So Synergies are huge. Cost saving will be tremendous and that saved money can be spent on upgrading the infrastructure. (I know mostly it will be distributed to shareholders rather than upgrading network). I don’t understand why people who are claiming that it will end competition accept Apple’s decision to launch Iphone and Ipad only on AT&T at the start. Was it not unfair play.

The ecosystem and devices are evolving at breathtaking pace. Devices are outsmarting the network. I believe the Industry is going towards utility approach. (I read about this in business week).  So AT&T and Verizon will be under heavy scrutiny all the time. As you have regulations, price controls in electricity industry similar regulations will start shaping in telecom industry. The biggest looser of this will be AT&T and Verizon and not consumer. You will now have 4 utilities instead of 3. Electricity, Water, Gas and Network. All other three industries are heavily regulated. Do you care who is your service provider for water? Not really as you are sure that regulations will make sure quality is in place similar thing is going to happen here. Regulation will play major role. So it is not bad for consumer but is bad for AT&T itself.

In short term of course they will gain market share, they will surpass Verizon in consumer numbers, synergies will create windfall for shareholders but in the long term that will cement its place as a Utility. That means even lower margins, no chance of innovation and heavy regulations. In the capital economy as soon as you raise the prices you will have alternatives popping up so we will have a next wave of silicon valley companies that will create new ways of communication.

So in all not allowing merger does not make sense. T mobile has already decided to sell so if you do not allow merger we will have stalemate, T mobile will start to see diminishing power and that will not help competition and infrastructure anyways. 

Signing off

Nikhil Parchure.

Future Problems……or Markets

 

Note: I read interesting article on National geographic website. The thoughts mentioned below are influenced by the article. Article talks about growing population, I thought of linking it to business.

Everyone talks about growing population of human race. Growing at astonishing pace the population of world will reach around 10.5 billion by 2050 (National Geographic study). We are already pushing available resources to its limit and this increase in population will strain the earth further. Oil, Metals, Food you name it and the prices are rising. Is it time to worry? of course it is but that does not mean you should not look for opportunities. 

Every problem presents an opportunity so which businesses will help in solving the problem but also profit from the situation. I think of three main businesses, Water, Food (Agriculture and Fishing), Environment. 

Now let me explain about that in little detail. Water, no question about it, we are already depleting ground water levels and using far more water than available. Also we are polluting large percentage of water available for use. So Water purification, water desalination, water conservation and technology to reduce water usage will be big potential. If you calculate amount of water needed to support growing population the number is mind boggling.  Changing environment, I don’t like to call it global warming, is bringing more droughts which means ever decreasing supply of fresh water. The challenge is huge and there is no clear solution in picture. Companies that come up with innovative solution in this field will succeed big way.

Food; after water, food is the second highest priority. Droughts are adding pressure on global supply of food grains. Also productivity of soil is going down every year due to excessive farming and use of huge amount of fertilizers. So companies that make organic fertilizers & new generations of seeds will benefit a lot. The world needs path breaking innovation in this field to feed all the human race. Another big source of food is fisheries. Again there is problem of excessive fishing and pollution. Amount of catch is reducing every year and that will put more pressure on food supply. Companies in the field of developing fast growing breeds of fish, fish with high nutritional values and developing breeds that can resist polluted waters will have big opportunity. Pollution control and mitigation companies will also play a major role.

Third major trend of course the environment. Pollution control, pollution reduction and pollution cleaning these three fields will be critical. Pollution control contains all activities such as waste disposal, recycling, purification and treatment etc. Pollution reduction contains developing new technology for more efficiency, you may consider clean-tech (but clean-tech covers many other industries too). pollution cleaning will also be a big industry. Considering the fact that we have already polluted air, water and other resources we will need to clean them some time.

People may argue there are many industries that will benefit from population growth. I agree but I wanted to highlight industries that can grow fast and also make a huge impact on resolving major issues.

 

Disclaimer : Some facts are taken directly from national geographic study. I am not endorsing any industry, brand, company. The effort is to express my opinion on the future markets. There are many assumption made which are not explicitly mentioned in the post. In case you do not agree, I respect it. You can post comments with your feedback, suggestions.

Signing off

Nikhil Parchure.