The pace of mergers and acquisitions in the telecom industry continues to hasten in 2018. We expect the pace to continue with Deloitte pointing towards more mergers between telecoms and technology.
Consider telecom companies involved in recent mergers: Horizon Telcom, Novacamp TMT, Atlantic Broadband, South Florida Fiber Network, 1st Point Communications, Shelcomm, Broadsoft, Cisco, Education Networks of America, Telequality Communications, Allott, Netonomy, Tele2, Com Hem, Sangoma, Converged Communications, Votacall, Lyrix, GTT, Custom Connect, Polycom, Obihai Technology, Westcorp, PhoneTree, ALLO Communications, Glenwood Telecommunications, Star2Star Communications, BlueFace... and these are ones involved in mergers and acquisitions announced in just January of 2018. Can you imagine what the entirety of 2018 holds?
The reality is that the industry is in such flux right now, and that flux creates opportunities for companies to add value by picking off another one. There is such organic room for innovation currently in the industry that when an upstart takes off, a more established company notices, finds the upstart’s services are a good match for their offerings, and gobbles them up. Or the reverse could be true: the upstart gains some traction and finds value in acquiring a more established company with up-and-running infrastructure to purchase.
FierceCable predicts at least one or two mega-mergers in 2018: “The regulatory tide is right for a big deal. And the desire for scale is strong.”
But while industry prognosticators await “the big one” in 2018, there are, perhaps no less important, plentiful mergers and acquisitions of a smaller scale to start 2018.
Interestingly, companies that haven’t traditionally had a telecom footprint are acquiring telecoms to add lateral value to their offerings. Consider Education Networks of America, traditionally an infrastructure company, merging with Telequality Communications.
“It is a perfect fit that will help us provide enhanced services for our customers and further bridge the digital divide,” Nashville-based Education Networks of America (ENA) today announced the completion of its merger with TeleQuality Communications (TeleQuality) of San Antonio, Texas.
These are the types of mergers and acquisitions that are very exciting and reflective of an atmosphere ripe for innovation.
But deals are happening at all levels so far in 2018. This is more typical of what we are seeing:
“Atlantic Broadband, the nation’s 9th largest cable operator, has signed a definitive agreement to purchase the entire South Florida fiber network from FiberLight, LLC, an industry leader in providing high-performance fiber-optic network solutions. Upon completion of the agreement, Atlantic Broadband will add approximately 350 route miles to its existing South Florida footprint, more than doubling its existing fiber footprint in the region.”
So, some points to keep in mind if a suitor comes calling:
Horizontal vs. Vertical: Historically, companies built upward, rather than acquired and merged based on adding to their existing strengths. That’s been changing. Companies are looking for partners that can complement their existing suites of services. If a suitor comes calling, you may wish to consider whether the merger builds upward or laterally. Lateral mergers generally avoid costly service redundancy and provide more avenues for growth.
Cost: Of course, the bottom line in all of these mergers is, well, the bottom line. Does it make fiscal sense? A short-term hit from merging with a struggling partner may make long-term sense if it opens up new efficiencies and growth channels.
Geography: This has always been a factor entered into the merger mix. You don’t want to merge with a company that has fiber optic cables all over Spain if you also have fiber optic cables all over Spain unless you are trying to strengthen your foothold there. You want a geographic merger that makes sense and stabilizes your business.
As the telecom landscape changes around you and mergers and acquisitions upend the marketplace and change the trajectory of companies overnight, you need to continue to focus on your core services.
And if a merger isn’t in the cards, you can always partner with an outside entity that provides a suite of global telecom services on a contracting basis. Need help setting up a payment processing platform in Pakistan or linking a multi-site business campus in Cairo? You don’t necessarily need to merge or acquire to do that. You could use the services of a global field dispatch company to help lead the way.
Meanwhile, keep doing what you’re doing and keep an eye on the merger market in 2018, because someone may just come knocking at your door. Well, no one comes to anyone’s door anymore — but you may just receive an interesting email from a possible suitor.
