Consolidation is on the agenda for the telecom industry. The EU Commission is currently scrutinizing Telefonica’s acquisition of E-plus in Germany, Hutchison’s bid for Telefonica’s mobile operation in Ireland. It was therefore no surprise that TMT M&A Forum in London earlier in the week attracted around 160 people as the conference theme was on how transactions, joint ventures and partnerships are driving change in telecoms, tech and media globally. Present were people from finance, legal, consultants and operators, and one representative from the regulatory side (the author). I would like to highlight three take aways from the conference:
1) Market forces are gravitating towards fewer networks as the the transition from voice to a data centric business is requiring a considerable higher capital intensity, calling for return on investments in the same time as traditional business models are challenged, with an escalating demand for better coverage and higher capacity. Altogether, no operator wants to be number 3 or 4 on markets which have gone ex-growth.
2) Network sharing is growing on all markets as it enables operators to lower opex as well as capex, and preferably also involving spectrum sharing. The number of network sharing deals is growing rapidly and the Forum underscored that it is a global phenomenon. And in case operators are financially stressed or would like to release capital in order to expand on growth markets there are a growing number of tower companies and investors prepared to buy towers and physical infrastructure. The trade-off for operators is to get handsomely paid for their towers and then strike rent agreements at manageable levels.
3) Regulation should be relaxed and let the market decide. The financial market is opportunistic and operators are predominately taking the stance that benefits them the most for the moment questioning the processes in Brussels as not allowing for dynamic market forces to shape the market. However, the Forum concluded that regulators have to be present in order to deepen the discussion not only concerning spectrum but also who will control the pipes making the question of net neutrality more important than ever.