Consolidation in the Telecom sector mainly happens when companies are looking for technology, customer base, or product diversification. Telecom and Media companies majorly take part in merger and acquisition (M&A). Most of the acquisitions in the telecom sector are horizontal, i.e., Companies are looking to acquire competitors to have the edge over remaining players. Apart from attaining competitive benefits, M&A also help in increasing their control over the market segment and have a technological upgrade. It is estimated that the telecom industry has spent more than US$1 trillion in M&A activities over the last 10 years globally. Most of the M&A activities were done for expansion in the customer base and increasing telecom services portfolio.
Some of the major M&A activities in the telecom sector are given below.
- Vodafone India merged with Idea Cellular and was renamed as Vodafone Idea in 2018.
- T-Mobile and Sprint planned to merge in a deal that valued the combined company at $146 billion in April 2018.
- Mobile phone network EE was a takeover by BT Group in 2016.
- Bharti Airtel acquired Telenor India in May 2018
- Bharti Airtel completed the merger of Tata Teleservices’ consumer mobile business in July 2019
Other major factors which compelled companies for an M&A are in areas dealing with infrastructure developments and gaining spectrum licenses. Favorable regulations by telecom regulators have abled increase in growing private sector investment FDI
While M&A activities have several benefits, they also bring some issues in the market, including monopoly over the network providers or lack of competition leading to huge rise in internet/call usage charges. It can also lead to a high level of attrition rate in companies which get acquired. Telecom regulators must ensure that the market competitiveness co-exists albeit acquisitions in this sector.
– Arjun Das
ICT – Research Analyst