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Could T-Mobile’s merger with Sprint hail the beginning of a new dawn for M&A activity in global telecoms markets?
T-Mobile’s $26.5 billion mega merger with Sprint could herald a flurry of M&A activity in the global telecoms market, according to industry experts.
Speaking to Bloomberg, EY’s global vice chairman of transaction advisory services, Steve Krouskos, said that his firm expected to see considerable amounts of activity in the global telecoms market.
"This deal is a great example of what we will see more of in the telecoms space. With the capex that will be required for 5G build outs, companies will need to create bigger economies of scale.
"You are also going to see convergence and blurring of lines between telcos and media companies. We are already seeing that as consumers choose different ways to consume their media.
"I think it’s going to be a very active year for telecoms and the entire TMT (technology, media and telecoms) space," he said.
With operators around the world battling to turn a profit and create economies of scale, consolidation is an attractive prospect. Should the proposed deal gain approval from the appropriate regulatory bodies, operators in Europe may be left asking why they are not being provided with the same opportunities for growth as their American cousins.
"You have to remember that the European market is extremely fragmented. We look at the US market with very jealous eyes. They have scale, in terms of number of customers. You even have scale in terms of content, with only one language to consider, maybe two with Spanish. Compare that to Belgium with its 11 million people divided into 6 million Flemish speakers and 5 million French speakers. It’s a real headache. Scale is essential. Scale is what you want. If you don’t have the scale, a business like mine cannot be profitable," Daniel Kurgan, CEO of BICS, told Total Telecom in an exclusive interview last week.
Until recently analysts have remained muted in their assessment of potential M&A forecasts for European telcos, given the European Commission’s insistence on a minimum of 4 network operators in every market. However, some analysts believe that the T-Mobile-Sprint merger in the US could see Europe’s regulatory bodies finally allow a greater deal of consolidation in their own markets.
"The US operator market is mature, suffering from flat revenues. Fast data traffic growth triggers a continued need for big investment that’s not sustainable in a four-operator market structure – whether in the US or Europe. The merger will change this, creating a market with three comparable players driving healthy competition that will mean continual tech investment and ultimately, better service for customers.
"The European market is long overdue for consolidation. As Europe continues to take its cues from the US, this might lead regulators to recognise the opportunity these mergers present to the market and approve consolidation in the EU," said Bengt Nordstrom, CEO of Northstream.
Whether or not the European Commission relaxes its rules on consolidation, Kroukos is adamant that 2018 will see a flurry of M&A activity in the telecoms market space.
"You are also going to see convergence and blurring of lines between telcos and media companies. We are already seeing that as consumers choose different ways to consume their media.
I think it’s going to be a very active year for telecoms and the entire TMT (technology, media and telecoms) space," he said.
