Industry expert Jonny Parkinson, managing partner at Marktlink, offers an insight on Telecoms.com into telecommunications mergers and acquisitions, despite current challenges, such as economic instability and global tensions. Communication technology M&A remains a force to contend with in a world that is increasingly becoming digitised. Reflecting this, in 2022, the TMT sector accounted for a quarter of all global deals.
Despite the uncertainty that defines the business landscape, businesses should remain prudent. The ability to adapt to rapid changes in this sector can make or break a company’s success. M&A activities could prove to be critical towards managing this risk.
In this uncertain climate, many CEOs are showing resilience. They optimistically predict an increase in strategic deal-making for the latter half of 2023, intended to bolster their companies’ growth and reposition them favourably in the market.
Innovation
In 2022, deal-making dipped by 41% in comparison to the previous quarter. Yet, it suggests a recovery of sorts in the industry, with a return to competitiveness. The 5G technology wave, for instance, has not caused as much disruption as initially predicted. To stand out in this dense market, telecommunications companies need to offer value-added services, customer-centric experiences, and custom solutions. Artificial intelligence (AI) is expected to play a crucial role here.
Swisscom is an example of a company staying ahead of the curve by focusing on cloud computing. They are training their employees to help customers navigate their own journey to the cloud. Such initiatives can improve a company’s flexibility and innovation while also reducing costs.
Positioning
In this intensely competitive environment, many companies have chosen to invest heavily in new technology to gain an edge over competitors. This can be a costly exercise, pushing smaller, more innovative companies to partner with or be taken over by larger players. The increasing globalization of the industry also puts pressure on businesses to reach larger customer bases to succeed, often fuelling the desire for acquisition.
Telecoms companies need to consider new ways of structuring deals and financing these acquisitions. They need to adapt as regulatory constraints tighten and debt costs increase. These creative alternatives could include asset and equity swaps, alliances, joint ventures, or spin-offs.
Strategic M&As
Several private equity investors are seeing opportunities in the telecoms sector, capitalizing on lower asset prices and the subsequent boom in private investment and public-to-private transactions. Highlights include KKR’s high-profile acquisition offers to Telecom Italia and CyrusOne.
However, caution is key for telecoms operators approaching potential M&A targets. They need to strike a balance between paying the right price, managing integration smoothly, and anticipating possible regulatory barriers and disruptions. Thorough due diligence is crucial in ensuring that buyers have comprehensive knowledge of what they are purchasing and the associated risks.
Although the telecoms industry is in a phase of continual change due to evolving technology, companies can navigate this complex landscape successfully by understanding the unique demands of an M&A deal and choosing the right strategic advisor. Specialists like Jonny are equipped with industry-specific insights and offer sound advice on business owners’ aspects in the SME and mid-market to maximize their M&A activities.
