Telecom Sector Eyeing Consolidation Globally
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