Consolidation will occur in the cellular space. It’s inevitable. Verizon and AT&T dominate the industry with 111 million and 105 million subscribers, respectively. Sprint, T-Mobile, MetroPCS, Leap, and smaller carriers are looking for a way to better compete.

The first really big move in this consolidation occurred earlier this year when AT&T tried to buy T-Mobile. AT&T wanted to get bigger to stay competitive with the larger Verizon and to get more spectrum for LTE expansion. While T-Mobile owner Deutsche Telekom was all for it, the Federal Communications Commission (FCC) and Justice Department said no. Now AT&T is moving ahead on its own to expand its LTE network. It will continue to do well against Verizon. T-Mobile will probably move ahead with LTE but at a slower pace than optimal. Oh well…

The number three carrier, Sprint, could have gone after T-Mobile. It would have been a tough deal with the incompatible cellular technologies and Sprint’s financial issues, but they could have worked something out with both headed to LTE in the future.

Now we have number four T-Mobile with about 33.2 million subscribers making an offer to acquire number five MetroPCS with an estimated 9.3 million subscribers. Again, they face the technology incompatibility problem. But with both moving to LTE, eventually things would work out. This seems like a good combination otherwise. The deal is in the works for roughly 42.5 million subscribers combined, putting it on par with number three Sprint with its estimated 56 million subscribers.

Sprint has said it is interested in MetroPCS too and could make a competitive offer. With compatible technology, this seems like a good arrangement too. Sprint is still thinking it over.

In the meantime, Japanese telecom and Internet company Softbank is buying a 70% stake in Sprint. This would solve Sprint’s lingering financial problems and let it really push harder for a larger LTE network sooner, keeping it competitive. With a huge cash infusion, Sprint would be in a position to acquire the T-Mobile/MetroPCS combo to be even more competitive. One big issue is what to do with Clearwire, of which Sprint owns a 49% share. All these mergers and investment deals are subject to government approval, so we will have to wait and see how they go.

Anyway, consolidation is going to happen. And it is just as much about spectrum as it is number of subscribers. It will cut the number of carriers down to just a few really big ones, but I’m not sure that’s a bad thing. We will get LTE faster, and that could partially solve the broadband shortage in some parts of the country. Now the main thing we have to worry about is the lack of good spectrum for that expansion. The FCC is working on it. I hope it’s a priority.