Telecom consolidation continues in U.S. and Europe

Verizon is in advanced talks with Alltel, aimed at acquiring the mobile player. The move would make Verizon the largest mobile operator in the U.S. and a more effective competitor to AT&T. It also signals yet again the shift in the mobile market.  Consolidation is not a move that is undertaken in a dynamic and growing market, but rather in one that is already facing commoditization. France Telecom has also announced negotiations to acquire Swedish phone company TeliaSonera, a move that would create the EU’s largest operator. All consolidation moves are aimed at creating economies of scale, and in FT’s case, these are targeted initially at operations costs and core network costs, since access networks are not generally overlapping and don’t generate any real consolidation economies. In the case of Alltel, we believe there will be a net reduction in mobile spending.