Why even small telecoms are merging

Merger mania has hit the telecommunications industry: Time Warner Cable and Charter, Dish and T-Mobile, AT&T and DirectTV — and Atlantic Broadband and Metrocast Communications of Connecticut. 

Yes, even small regional cable companies are growing through acquisition. Greg MacDonald, head of research at Macquarie Canada, says it’s for some of the same reasons as the large ones: economies of scale, and maybe some bargaining muscle.

But SNL Kagan analyst Ian Olgeirson says the small fry don’t get the same advantages as the mega-mergers when it comes to striking deals with the companies that sell programming. “What they’re really looking for is, you don’t need two accounting departments, you don’t need two HR departments,” he says. “Those kinds of fairly straightforward type of operating efficiencies.”

But those smaller benefits don’t necessarily come with a smaller per-customer price tag, which is one reason law professor Peter Carstensen says the urge to merge is often irrational. In fact, he says, most mergers fail.