Jeff Kagan: Hedge Funds and Investors Want to Know What’s Next

Jeff Kagan  |

My phone has been ringing off the hook lately. Assorted investors, investment companies and hedge funds are looking to better understand the changing telecom, wireless, television and Internet marketplace. They are not looking for investment advice, which I don’t give, but they are looking to better understand the changes that are occurring.

Let’s take a quick look at how these different industry segments are changing and the opportunities and risks they present for workers, customers, competitors and of course, investors.

Twenty years ago, in the 90s, there were a variety of competitors in each of these spaces. They were smaller companies and didn’t compete outside their region or specific product mix.

Ten years ago, in the 2000s, the companies had changed. There was a wave of M&A activity and the result was fewer and larger companies that competed more nationally and in more segments. Example: the Baby Bells didn’t just sell telephone, they also sold high speed Internet, and wireless services.

During the 2010’s we are going through another wave of change, which will transform the industry once again. We will end up with even fewer and larger companies, competing even more nationally and in more segments.

Taking the example one step further, there are fewer Baby Bells, they are even larger, they offer more services in a bigger geographic footprint. Now they are even selling television and competing against new companies like the cable TV industry and Internet based competitors for voice and data services.

Now we see the next wave starting. More consolidation. This will mean fewer actual companies, but it will allow more of them to compete more nationally for the first time.

Consider AT&T (T) as the most recent example. They want to acquire DirecTV. The reason is they will be able to compete for television on a national scale and not just in their region of the country. This will give them a much bigger growth opportunity. That means they will be able to compete against companies like Comcast (CMCSA) , Time Warner Cable (TWC) , Cox and more.

A few months ago Comcast said they wanted to acquire Time Warner Cable for similar reasons. Size. And a few months before that Sprint said they want to merge with T-Mobile for similar reasons. Size.

They say size will let them compete much more effectively. This is what regulators are wrestling with right now.

The reason all these companies are changing and expanding is simple, growth for the investor. They need to keep growing to keep the investor happy.

Investors are only concerned with one thing. Profits. Consumers are concerned with a different thing. Good quality, and innovative and affordable service.

So expect this wonderful world of wireless and telephone and Internet and television to continue to grow and change over time. Companies need to continue to grow. It’s like taking their next breath. That means they will continue to merge and eventually become national competitors.

I cannot predict which of these mergers will be a grand slam home run, and which will be strikeouts if any. What I can say is this is the next step in the evolution of these industry segments and because of that regulators will likely approve some or all of them.

Investors will love this because the company and their investments should continue to grow.

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Consumers will love this as well. As these companies become more national in scope, they will compete more intensely. In that world, increased competition should mean prices should come down and innovation should go up.

And after all, as a consumer, wouldn’t you prefer it each year not to get your notice that your cable television prices are going up again, year after year. We can only hope.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:

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