Global Telecommunications M&A Driven By Sector Convergence And Digital Disruption

Sector convergence and advances in technology and digitalization are altering the telecommunications landscape, according to EY's 15th biannual Telecommunications Global Capital Confidence Barometer (CCB). The report surveyed 107 senior leaders from telecommunications companies around the world.

Almost half (49%) of executives cite sector convergence and increases in competition as the biggest disruptor to their core business, while 43% say the impact of digital technology on their business model is the most prominent issue on the boardroom agenda. As a result, telecommunication companies are looking at organic and inorganic opportunities to boost growth and earnings.

Forty-eight percent of telecommunications executives indicate that they are actively pursuing a merger or acquisition in the next 12 months, up from 43% six months ago. This confidence is reflected in the number of deals telecommunications companies have in the works, with 37% indicating that they have five or more deals in the pipeline. Almost half (49%) of these deals are valued at US$250m or less.

Gaeron McClure, EY Global Telecommunications Leader, Transaction Advisory Services, says:

"Positioning for convergence is driving a number of high-profile deals in the sector, yet smaller deals that can fill gaps in portfolios or provide innovative assets or people are also moving into focus as companies look to overhaul their business models. In this light, a number of carriers are pursuing 'bolt-on' acquisitions in areas such as Internet of Things (IoT) and over-the-top video services."

As telecommunications companies react to the digital disruption that has upended business models across the industry, acquiring talent has become a strategic priority, with 53% of telecommunications executives saying that they need to hire more talent in the months ahead. It's also the most significant strategic driver for pursuing acquisitions outside of the sector, according to 71% of CCB respondents.

McClure says: "As telecommunications companies seek to reinvent themselves to compete in a digital world, they are considering deals that not only bring them to the forefront of technology and innovation, but also acquiring the talent they'll need to get there."

Source: EY release