Mobile Industry Dances Toward Consolidation

Rumors of a tie-up between Leap Wireless and rival MetroPCS are flying again following yesterday's report in the Wall Street Journal that Leap is seeking a buyer. But will Leap strike a deal with MetroPCS before T-Mobile USA finds a partner in what looks to be a coming wave of carrier consolidation?

The U.S. wireless market has striated into first-, second- and third-tier carriers, and AT&T and Verizon Wireless continue to increase their leads over the rest of the field. The saturated market leaves little hope for Sprint and T-Mobile to turn things around in terms of subscriber adds, plus T-Mobile is in a sticky position when it comes to having enough spectrum and the funds to acquire more for next-generation wireless technologies. In the meantime, there's pressure from prepaid carriers attacking from below and high fees paid to other telecommunications players for Sprint's and T-Mobile's mobile backhaul that's cutting into profits and revenue.