NEW YORK (Reuters) - There’s not enough room for both Clearwire CLWR.O and Harbinger Capital-backed LightSquared in the U.S. telecommunications market, according to a top AT&T Inc (T.N) executive, who said they’d be better off consolidating.
Clearwire rents network space on a wholesale basis to other wireless services such as Sprint Nextel (S.N), which uses the space to sell high-speed wireless services. Sprint is a 54 percent owner of Clearwire. LightSquared wants to enter the wholesale wireless market.
Both have struggled to drum up additional funding needed to either expand or begin building their wireless networks.
John Stankey, the head of AT&T’s enterprise business, said the best hope for U.S. mobile wholesale providers may be to get swallowed up in a merger as the U.S. market is hardly big enough for one wholesaler, let alone two.
Stankey’s remark comes as AT&T awaits regulatory approval for its $39 billion deal to buy T-Mobile USA, a unit of Deutsche Telekom (DTEGn.DE).
“We have two people staking out a wholesale play in the market. It’s hard in economic theory and it’s hard in past practice in telecommunications to ever find a market where two wholesale players ever competed effectively,” Stankey told Reuters ahead of the Global Technology Summit.
“There really isn’t a profitable wholesale model in wireless today,” he said. “Do you know one that’s making money? Do you know one that’s on a trajectory to make money? Do you know of one that’s not in jeopardy of running out of money in the next 12 months?”
If it is each companies’ goal to gain a return on the massive cost of building a network, Stankey said he “could see a case that suggests there would be further benefit to additional consolidation in the wireless marketplace.”
Analysts have predicted that Sprint will end up buying the portion of Clearwire it does not already own.
The thinly veiled dig at Clearwire comes after Clearwire’s top executive John Stanton openly attacked the AT&T deal in March, saying it would make it more difficult for smaller companies to compete in the market.
“If there’s such a credible (wholesale) business model, is there not capital that should be attracted to it?” AT&T’s Stankey said.
Reporting by Sinead Carew; Editing by Phil Berlowitz