More UK consolidation rumours...but does it make sense?

This time it's Orange that the speculators have their eye on. According to a report in the Financial Times. Or 3, if you believe others.

The basis for the FT speculation was a comment by Rene Obermann that "We feel the UK market is competitive, and consolidation would do good for that market". True. A maturing market naturally consolidates. The question is how that is achieved?

At the network layer we're already seeing it, thanks to network sharing deals such as the MBNL jv between 3 and T-Mobile and outsourcing deals of which there have been many recently. Effectively this reduces the number of networks from 5 to 3 or 4. This makes operator level consolidation increasingly unlikely. If network operations are consolidated and outsourced, MNO operations focus on sales and marketing, creating "service providers" (SPs). There's certainly room for more than 3 or 4 SPs in any market.

The issue then is segmentation. MNOs/SPs tend to focus most of their attention on the same segment, high-end consumers, but in a very homogenous way. For there to be room for all the SPs they need to rethink their target segments, whether they be sub-segments of high-end consumers, or a different group altogether.